Ultra-high-net-worth (UHNW) investors are stepping into investing into SME firms through private equity via single-family office vehicles, according to a new report.
The number of single-family offices has risen over 40% since 2008, according to investment bank JPIN.
Whilst institutional investors are stepping back from direct private equity allocations, private investors are filling the gap they have left behind, according to the investment bank.
Single-family offices are reducing fixed income allocations and increasing investments in private equity. Over four in ten (42%) of family offices are looking to increase direct private equity allocations due to the potential to produce higher returns, according to research from the UBS Global Family Office.
According to the UBS report, 43% of family office investors want to invest in sustainability companies, 34% want to invest in biotech/medtech, 26% want to invest in fintech, and 16% want to invest in startups.
Gaurav Singh, founder of JPIN, said: “It appears family offices could come to the fore to fill investment gaps in the market at a time when valuations are dropping and confidence from some institutional investors is decreasing. This increased activity from a different branch of the investment sphere could provide startups with an injection of much-needed capital which will also help to stimulate the economy during these challenging times.
“Research shows there is a clear focus on private equity investment for family offices – with 42% planning to increase their funding in this area. Within this, technology is the most common sector, given the continuous desire for digital transformation across the world.”
Single-family offices often have less constraints than venture capital or private equity firms and are able to ‘pivot quickly in relation to an ever-changing landscape’ according to JPIN.