Findings from a survey carried out by FOX support the notion that direct investing is an increasingly attractive financial endeavor for family offices.

Over two-thirds of family offices engaged in direct investing in 2015, a global survey by Family Office Exchange shows.

Although family offices have for a long time now been making direct investments in private companies, it has been widely reported that the trend is accelerating.

“Investing directly in real estate properties or operating companies is familiar for many family offices that earned their wealth by building businesses,” said Charles Grace, a managing director at FOX. “In the face of volatility in the public markets, direct investments can seem a haven for those who want transparency and prefer taking risks with companies and/or properties they can investigate and perhaps control in some manner.”

Families led by first- or second-generation individuals are more likely to make direct investments than families with later-generation leadership, according to the study, with 81 per cent of Generation 1-2 families engaging in direct investing compared to 46 per cent of Generation 3 and beyond. Additionally, 40 per cent of the 80 respondents said they prefer having a lead role that gives them transparency and control. In sourcing direct investments, 71 per cent said they rely on networking, their existing relationships or through “word of mouth.”

As FOX noted, a key issue related to this topic concerns due diligence on opportunities and deal pricing - the two biggest challenges cited by direct investors.

“Deal pricing has become a bigger challenge in executing a successful direct investment strategy as the market has become more efficient,” said Karen Clark, managing director at FOX. “Evaluating opportunities is a bigger challenge for participants than finding deal flow.”

The findings add weight to the notion that the trend of family offices and other accredited investors engaging in the world of direct investing is intensifying, driven by a number of forces (click here to see a feature on this topic). According to a 2012 study by the Wharton Global Family Alliance, average portfolio allocations by single family offices to direct investments rose from 6 per cent in 2009 to 11.4 per cent in 2011.

Other findings from the 2016 FOX Global Investment Survey include that the median overall return for participants in 2015 was 2 per cent, with 6 per cent expected for 2016. Additionally, direct real estate and direct private equity investments enhanced returns logged in 2015, gaining 18 per cent and 15 per cent respectively. Meanwhile, 78 per cent of families are “broadly diversified with a conservative growth orientation,” FOX said, including 20 per cent to cash and fixed income, 43 per cent to equities, 2 per cent to hard assets, and 33 per cent to alternatives.