Family Office Private Equity Question: To Invest Directly or Not?
The Private Equity Investment Question
Family offices have to ask themselves if they should invest in private companies directly, or if they should invest indirectly through private equity funds. It is important to look at the math of the situation, but also to look beyond the math:
- The Math Behind It - Family offices need to compare the costs of paying a private equity fund its typical 2% management fee to the costs of hiring an internal team. A $100M private equity investment would produce $2M in management fees. Can the family office hire a team for less than that?
- Beyond the Math - Hiring top private equity professionals is not as easy as it sounds. To avoid paying management fees, family offices will need to be able to generate proprietary deal flow, conduct due diligence, and identify value creation opportunities