Family offices scale up private equity operations

Wealthy families are rewriting the rules of private equity investing, as they professionalise their teams and adapt to market shifts.

Once quiet backers of private equity funds, family offices are now taking the lead in high-value buyouts, transforming from silent partners into powerful dealmakers.

As they scale up operations, professionalise teams, and take more active roles in investment strategy, these quasi-institutional entities have become both rivals and partners to traditional private equity firms.

“Over the past decade, deal sizes have grown steadily as family offices move beyond passive fund investments into direct ownership of companies,” says Jon Flack, global and US leader of PwC family office and family business practice.

Direct deals, co-investments and even lead acquisitions across sectors are now common, driving a need for stronger infrastructure and governance. To manage larger and more complex portfolios, many family offices are hiring private equity professionals, legal counsel and accounting experts.

“Because deal sizes are getting larger, they’re having to evaluate governance structures and bring in specialised talent to support daily operations and monitor portfolio companies,” adds Mr Flack.

Medium- and large-scale deals now account for a growing proportions of US family office portfolios, according to PwC’s Global Family Office Deals study,

Smaller transactions have declined by 12 percentage points over the past decade, indicating a clear shift toward more substantial and strategic plays (see chart).

Two key factors are driving this evolution. First, a slowdown in broader private equity activity has opened up opportunities for nimble, well-capitalised investors. Second, years of managing smaller deals have given families the confidence to scale up.

“Families start small, get more comfortable over time, and naturally feel more confident to do the larger deals,” explains Mr Flack.

While family offices continue to rely on external advisers, such as law firms, accountants and consultants, internal teams are growing stronger, more disciplined and more strategic.

“We’re seeing more families get disciplined around what type of deals they will look at, and how long they plan to hold them.”

Rise of the club deal

This shift is not exclusive to billion-dollar dynasties. While some family offices are executing large-scale acquisitions, many others remain active with deals under $10m, often through club deals, where family offices co-invest with peers or institutional partners.

Club deals now represent more than 70 per cent of US family office transactions, according to PwC. These collaborative structures allow investors to share expertise, access larger deals and mitigate risk.

Private equity firms remain key co-investors, especially in venture capital. “Families may start as passive investors but then evolve into active deal participants and become co-investors,” says Mr Flack. “They leverage the expertise of a private equity firm to build industry knowledge. That’s a way they can extend their reach and capabilities.”

Cost is a key driver of the shift to direct deals, with many families growing wary of the high fees charged by private equity funds, says Mr Flack. This trend persists even as many private equity firms launch longer-duration funds, 10 to 20 years, to better align with family offices’ long-term horizons.

“The 2 per cent management fee and 20 per cent ‘carry’ have become really expensive,” he says. “It’s the first thing I hear when I ask why they’ve shifted: ‘Private equity has become too costly. We just decided to buy the companies ourselves.’”

Family offices bring ‘patient capital’ and, without pressure from outside investors, they offer long-term commitment and operational know-how. “Most families think about investments in terms of years, not quarters, and often bring industry expertise that can add significant value, as families typically invest directly in businesses they know,” he says.

Even with this increasing visibility, family offices prefer to remain discreet. “They don’t put up a website or send out flyers, but have strong networks, with investment banks, law firms and other families, and they get called all the time about deals because of their reputation,” says Mr Flack. Yet, active reputation management, especially in today’s digital world, is also critical.

Geopolitical risk

Volatility and geopolitical risk are playing a growing role in shaping investment strategy. Although geopolitical risk has always been a factor for families, recent turbulence has put many in a ‘wait and see’ mode, with industry data from KPMG showing a significant drop in deal activity during the first quarter of 2025.

“Increasingly, families are seeking expert insight and baking geopolitical risk directly into their investment models and being more thoughtful about where they invest,” explains Mr Flack.

According to the recent UBS Global Family Office Report, global trade tensions and geopolitical risks are the top concern for family offices worldwide.

Yet, most have already adjusted for volatility. Nearly 60 per cent of family offices plan to maintain their current risk levels this year, suggesting confidence in their long-term positioning.

“They aren’t blind to risk, but they don’t retreat from markets,” says Maximilian Kunkel, CIO global family and institutional wealth at UBS Global Wealth Management.

“They confront risk through greater diversification, active management, hedge funds and newer asset classes like precious metals.”

Moreover, he says, a clear strategy, prudent use of leverage and a focus on quality enable family offices to weather short-term volatility and fully participate in recovery.

Many have also embraced illiquidity as a strategic advantage. With no outside mandates or liquidity constraints, family offices can invest flexibly across public and private markets.

Alternative action

Today’s portfolios average 56 per cent traditional assets and 44 per cent alternatives, including 21 per cent in private equity, as well as real assets (see charts).

Even with low exit activity, more than a third (37 per cent) of family offices expect direct private equity allocations to grow this year. But building a full internal investment team is costly, so most offices lean on expert partners, sometimes using outsourced CIO models.

“We’ve become almost like a virtual partner for some,” says Benjamin Cavalli, head of strategic clients at UBS Global Wealth Management. “Some families rely on us for strategic asset allocation, where scale and infrastructure matter.”

Direct investments are increasingly complemented by fund exposure to enhance diversification while easing the operational burden, with 34 per cent anticipating growth in either fund, or fund-of-funds investments.

“They look for managers who focus on operational improvements and attractive valuations, not just financial engineering,” says Mr Kunkel.

For many, the line between public and private investments has blurred. “To them, it’s all equity,” explains Mr Kunkel. “They simply ask: where is the best risk-return opportunity right now, and how can we combine both to build a more effective portfolio?”