Key Takeaways
- • Family offices—particularly younger and newer entrants—are demonstrating a strong preference for direct investments and co-investments in private credit and private equity over traditional commingled fund structures, according to Fintrx's Q2 Family Office Intelligence Report.
- • When engaging external managers, family offices increasingly favor separately managed accounts over commingled funds, which provide greater flexibility on liquidity terms, termination rights, and portfolio control.
- • Direct investments and co-investments appeal to family offices because they offer higher potential returns, greater operational control, and stronger alignment with family priorities, as noted by Peter Naismith, head of investor representation at McDermott Will & Schulte.
- • Smaller and mid-sized family offices are turning to multi-family-office platforms to manage operational overhead and infrastructure costs associated with maintaining internal deal teams required for direct investing strategies.
- • Family offices are increasingly scrutinizing risk management frameworks, exit strategies, and return expectations as portfolio companies face mounting macroeconomic headwinds, bringing them in line with institutional investor concerns.
Summary
Family offices are reshaping their investment strategies by shifting toward direct investments and co-investments in private markets, particularly in private credit and private equity, rather than relying primarily on externally managed commingled funds. Data from Fintrx's Q2 Family Office Intelligence Report reveals that this trend is especially pronounced among younger and newer family offices, which view direct market access as a strategic advantage. This preference reflects a fundamental repositioning of family office capital allocation as these entities grow in number and size.
The attraction to direct and co-investment structures stems from multiple factors. Peter Naismith, head of investor representation at McDermott Will & Schulte, explains that family offices with dedicated investment teams strongly prefer the operational freedom and decision-making autonomy that direct investing provides. "There are returns to be had [in private credit], and families feel like they can have more of an impact with direct or co-investments," Naismith notes. Beyond return potential, direct investments enable families to align capital deployment with their specific investment theses and governance priorities.
When family offices do engage external capital managers, their preference has shifted toward separately managed accounts rather than traditional commingled fund vehicles. Separately managed accounts provide enhanced flexibility on key commercial terms, including liquidity rights and termination provisions, giving family offices greater control over their capital and exit timing. This structural preference underscores a broader institutional trend toward customized, rather than standardized, investment solutions.
However, the expansion of family office participation in direct markets has introduced operational and financial challenges. Direct investing and separately managed account management require substantial internal infrastructure, including experienced deal sourcing, due diligence, and portfolio management teams. Smaller and medium-sized family offices frequently lack the scale to justify these costs independently and are increasingly partnering with multi-family-office platforms to distribute overhead expenses and access specialized expertise. These platforms have become critical intermediaries in the family office ecosystem.
As family office capital has grown in prominence within private markets, these investors face scrutiny comparable to institutional investors regarding portfolio risk, exit planning, and return forecasting. With portfolio companies navigating deteriorating macroeconomic conditions, family offices are conducting comprehensive reviews of their risk management frameworks, liquidity expectations, and return assumptions to ensure durability across market cycles.
The attraction to direct and co-investment structures stems from multiple factors. Peter Naismith, head of investor representation at McDermott Will & Schulte, explains that family offices with dedicated investment teams strongly prefer the operational freedom and decision-making autonomy that direct investing provides. "There are returns to be had [in private credit], and families feel like they can have more of an impact with direct or co-investments," Naismith notes. Beyond return potential, direct investments enable families to align capital deployment with their specific investment theses and governance priorities.
When family offices do engage external capital managers, their preference has shifted toward separately managed accounts rather than traditional commingled fund vehicles. Separately managed accounts provide enhanced flexibility on key commercial terms, including liquidity rights and termination provisions, giving family offices greater control over their capital and exit timing. This structural preference underscores a broader institutional trend toward customized, rather than standardized, investment solutions.
However, the expansion of family office participation in direct markets has introduced operational and financial challenges. Direct investing and separately managed account management require substantial internal infrastructure, including experienced deal sourcing, due diligence, and portfolio management teams. Smaller and medium-sized family offices frequently lack the scale to justify these costs independently and are increasingly partnering with multi-family-office platforms to distribute overhead expenses and access specialized expertise. These platforms have become critical intermediaries in the family office ecosystem.
As family office capital has grown in prominence within private markets, these investors face scrutiny comparable to institutional investors regarding portfolio risk, exit planning, and return forecasting. With portfolio companies navigating deteriorating macroeconomic conditions, family offices are conducting comprehensive reviews of their risk management frameworks, liquidity expectations, and return assumptions to ensure durability across market cycles.
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