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Private Equity Must Market to Family Offices to Keep Going

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July 29, 2015

 

Private equity funds need to start increasing their marketing efforts to individual investors and family offices. These two investor types are continuing to increase their equity share in private equity funds and firms that miss out on these investments could risk losing out the fundraising wars.

 

The Rising Power in Private Equity

 

Individual investors together with family offices have been increasing their share in private equity funds in the past few years. The increase has been quite rapid and most industry experts believe the trend will only continue.

 

Palico’s research notes that in 2012, the family offices accounted for 8% of the world’s $4 trillion private equity assets. At the time, this was nearly a two-fold increase to levels just five years ago.

 

During the same period, the family offices and individual investors grew their allocation to private equity by nearly 10%. Whilst the allocation previously stood at 19% of their portfolio assets, the proportion had grown to 29% five years later.

 

According to a recent Forbes article, this means family offices and individual investors are the fastest group growing its allocation to private equity. The investor group is also the biggest allocator in private equity. Traditional Endowment investments are the second highest allocation group. But it has only increased private equity allocation from 12.8% to 13.6% in the same time.

 

Learning How to Market to Individuals

 

Private equity firms still need to learn a little more about marketing to individual investors. According to the Forbes piece, big private equity firms such as Blackstone and Carlyle are currently hiring in-house specialist who know how to target the wealthy individual investor.

 

There is also interest towards private equity firms such as DealMarket to showcase their expertise and work together to ensure more family offices get involved with the industry.

 

Forbes said the current rise of family offices and high net-worth individuals could be the “great revolution” David Rubenstein recently outlined. “Many managers who are not building up the resources and relationships to access wealthy individuals are not only failing to tap an important source of potential capital, they are also likely to miss out on that great revolution,” the article concluded.

 

Going After Local Markets

 

Emerging markets are especially lucrative when it comes to attracting high net-worth individuals and family offices. Local investors are looking to invest in local funds.

 

Most recently, Brazil’s private equity funds have been able to raise funds although the industry has faced plenty of challenges. Hamilton Lane has been reported to fundraise around $90 million with its latest Brazilian-focused fund.

 

Interestingly, a recent New York Times article noted that investors are becoming increasingly keen to taking a more hands on approach with their investments, something many private equity firms are currently failing to offer.

 

For private equity funds to thrive in today’s investor market, it is clear they need to become better at attracting family offices and individual investors and provide investors more control and clarity over the funds.

 

If you are looking for interesting private equity deals, then DealMarket’s platform is worth checking out.

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