Private Market Enthusiasm Molds Family Offices

Tom Burroughes

13 February 2025

Family offices are getting into the private market investing act so much that they’re increasingly resembling the structures they put money into. And they're having to realize their limitations and build new structures.

The trend seems obvious when many of the rising generation of UHNW individuals are business owners who’ve come out of tech startups, for example, fueled by venture capital. The Silicon Valley big-hitters, from Elon Musk, Mark Andreesen, Mark Zuckerberg and Larry Ellison, to those rather more under the radar in media terms, are legion. For them, the language of private equity and VC – “general partners,” “limited partners,” and so on – is second nature.

Family offices are working with their peers to put private market ideas into action. They realize that fund structures need to be formed to avoid problems, Mark Tepsich, family office design and governance strategist for UBS Family Office Solutions at UBS, told this publication. FOs are collaborating more and want information.

“Many FOs are trying to do single, one-off deals with a handful of other families and FOs. This is inefficient as you need to go to each family, every time, for every deal. Lots of these initiatives sputter because of this. Plus, it can often lack scale and that also makes it challenging to build an internal team for directs. Families are starting to come around to the idea of a fund structure – but it’s a whole new operating dynamic and responsibility to have investors,” Tepsich said.

UBS notes that there’s an evolution of family offices into the very organizations that created them – private equity general partners . By scaling these ambitions, families use their expertise to build businesses, transforming the investment landscape and driving long-term growth.

Into a void
Family offices face an information “vacuum” when it comes to doing deals and private markets more broadly, Tepsich said.

“This information vacuum extends beyond investing to operations, compensation, best practices and so forth,” he continued. “As a family office, you’re on an island and you’re not speaking to dozens, if not hundreds of other families/family offices/clients, like what happens at commercial firms.

“So, lack of information is worrisome for many family offices, whose performance can be judged by the overall market but more so by what their principal owners hear while they’re socializing with their peers, who also have their own family offices. No family office wants to be caught flat-footed by their principal who heard something from a peer and came back with questions such as “why didn’t we get into that deal?”

Dividing lines
An issue, however, from a regulatory point of view is when a family office-backed set of private market investments draws in money from other FOs. In the US, managing money for non-family members puts one under the Security and Exchange Commission’s umbrella.

Tepsich was asked what family offices that work with other FOs in these areas should do to handle such challenges.

“The family office will act as a springboard to the actual private equity fund for the family here. Once external capital and a fund is formed with it, you would have a family office, which is unregulated and then a PE firm and the committee, which is regulated. Then, there are reporting and disclosure obligations that come with being a regulated/registered PE fund. So, in essence, you have two legally separate and distinct firms,” he said.

Creating new routes
There is certainly evidence that family offices create subsidiaries or associate firms focused specifically on private equity and venture capital.

As reported here, based on European examples, cases include that of the Mulliez family of France, which invests in PE not through its family office, Mobilis, but through Creadev SAS which has invested €1 billion in private equity and venture capital since its establishment. Creadev SAS is a société par actions simplifié, a structure often used by families because of its relative simplicity compared with a socIété anonyme.

On a yet larger scale, another family of retailing billionaires, the Brenninkmeijers, the wealthiest family in The Netherlands and owners of the C&A chain, invest in private equity not through the family office, Cofra Holding AG in Switzerland, but through Bregal Investments LLP and its six Bregal associate companies, based variously in London or New York. Another Dutch family, the De Rijckes, who made its €2 billion fortune in drugstores, choose to invest in private equity and VC not through its family office, De Hoge Dennen Holding BV, but through De Hoge Dennen Capital PE BV, while its real estate investments are made though De Hoge Dennen Vastgoed.

Structured like PE
Along with the investment into private equity, in the US, practitioners tell this publication that a private equity, limited partnership structure has been the default option for some time, because it made more sense for a family office to be set up that way rather than as a corporation, given that for years the US corporate tax rate had been significantly higher than in most other major industrialized nations . That trend may change as the Trump administration moves to cut corporate taxes.

When family offices arose, as they first did in the late 19th century in the US , the structure tended to be that of the trust, given that trusts were already established in English common Law. As family offices have become larger, with more individuals involved in running and benefiting from the process, private equity structures, and the notion of being a limited partner having certain rights, and some limitations too, have tended to become more popular.

UBS's Tepsich concluded by reflecting on the willpower needed by wealthy families to make change.

“Let’s say there are 20 employees at a family office but there are two accountants. But let’s say the family office needs to upgrade its accounting infrastructure to another, more improved software which will make it more accurate and more efficient,” he said.

“This is a heavy lift for the two-person accounting team. You have to select the right software, understand how it will change the operating dynamic, take time to onboard and implement the infrastructure, learn it on the job – and also do your day job, which is accounting.

“Then of course there is trying to justify the cost of the new platform to the principal, who can often be cost conscious when it comes to the family office, rather than investing to help the family office be more efficient. Family offices per se are not profit-making enterprises, they exist to provide services for a single family, not have clients like in a commercial firm,” Tepsich concluded.