Family Offices Bypass Private Equity Funds to Make Bets Directly

Money managers for the ultra-wealthy are eschewing traditional private equity funds and betting directly on upstart companies.

That’s according to a new report by Dentons, which found that 63% of family offices use direct investments and an additional 22% are interested in doing so. The law firm surveyed 188 family office respondents from 32 countries for the report.

Direct investing has gained in popularity as a way to reduce fees from traditional private equity funds. That can mean taking a stake in a company directly or participating in club deals with other family offices.

Edward Marshall, global head of Dentons’s family office and high-net-worth sector, said that such investment firms are especially drawn to opportunities in health care, as well as disruptive technologies such as artificial intelligence.

“Many family offices, when they're making these types of investments, are going to be long-term thinkers,” he said in an interview.