Key Takeaways
- • 70% of family offices now engage in direct investing, according to Citi's 2025 Global Family Office Report, establishing direct investment as a dominant strategy in private capital markets rather than an emerging trend.
- • Fee structure arbitrage remains a primary driver, with family offices avoiding traditional 2-and-20 fund fees by deploying capital directly into portfolio companies, enabling fee-efficient capital deployment at scale.
- • Alignment of interests surged 52% year-over-year as a stated priority among family offices, per BNY's 2025 Investment Insights For Single Family Offices report, reflecting families' intent to leverage entrepreneurial heritage and industry expertise underutilized in traditional fund structures.
- • Control and operational transparency have become critical investment criteria, with direct ownership providing families greater visibility into portfolio company operations and decision-making authority compared to fund-based allocations.
- • Talent competition emerged as a structural bottleneck, with heightened competition for investment professionals limiting family offices' capacity to execute direct investment programs at scale.
Summary
Family offices have solidified their position as one of the fastest-growing forces in private capital markets, driven by a fundamental shift in capital deployment strategy. According to Citi's 2025 Global Family Office Report, 70% of family offices are now engaged in direct investing—a structural transition that signals direct investment has become a default allocation vehicle rather than an alternative approach. This movement was the focal point of discussion at the Family Wealth Report Summit held on November 17, 2025, in Manhattan, where investment professionals including Claire Champy (president, family office, Atlas Holdings), Brian Sun (vice president, Potenza Capital), Ira J Perlmuter (IJP Family Partners), and Pete Bennitt, CFA, explored the practical complexities of scaling direct investment programs.
The economic rationale driving this shift is multifaceted. Beyond the straightforward fee benefit of circumventing the traditional 2-and-20 fund fee model, family offices are prioritizing alignment of interests and operational control as core investment criteria. BNY's 2025 Investment Insights For Single Family Offices report documented a 52% year-over-year increase in family offices identifying alignment of interests as crucial to their investment decision-making process. This metric reflects a deliberate strategy to deploy capital in ways that leverage the entrepreneurial expertise and industry knowledge embedded within family enterprises—assets that often remain dormant or underutilized within traditional third-party fund structures.
Direct investment structures enable families to achieve greater transparency into portfolio company operations and exercise meaningful influence over strategic decisions. This control-oriented approach aligns with families' desire to apply their operational acumen and sectoral knowledge to enhance portfolio company performance, rather than delegating these functions to external managers. However, the acceleration of direct investing has revealed a critical constraint: heightened competition for investment talent. The report confirms that sourcing and retaining skilled investment professionals capable of executing direct investment programs at the required scale has emerged as a material bottleneck for many family offices seeking to expand their private market allocations.
The Family Wealth Report Summit panel, moderated by Maxime Seguineau (founder and managing partner, Raido Capital), underscored the complexity of building and maintaining successful direct investment programs. As family offices continue to evolve their capital allocation frameworks—moving away from blended public-equity-centric portfolios toward concentrated private market exposure—operational infrastructure, talent availability, and investment process maturity remain critical differentiators between family offices executing direct investing effectively and those encountering execution challenges.
The economic rationale driving this shift is multifaceted. Beyond the straightforward fee benefit of circumventing the traditional 2-and-20 fund fee model, family offices are prioritizing alignment of interests and operational control as core investment criteria. BNY's 2025 Investment Insights For Single Family Offices report documented a 52% year-over-year increase in family offices identifying alignment of interests as crucial to their investment decision-making process. This metric reflects a deliberate strategy to deploy capital in ways that leverage the entrepreneurial expertise and industry knowledge embedded within family enterprises—assets that often remain dormant or underutilized within traditional third-party fund structures.
Direct investment structures enable families to achieve greater transparency into portfolio company operations and exercise meaningful influence over strategic decisions. This control-oriented approach aligns with families' desire to apply their operational acumen and sectoral knowledge to enhance portfolio company performance, rather than delegating these functions to external managers. However, the acceleration of direct investing has revealed a critical constraint: heightened competition for investment talent. The report confirms that sourcing and retaining skilled investment professionals capable of executing direct investment programs at the required scale has emerged as a material bottleneck for many family offices seeking to expand their private market allocations.
The Family Wealth Report Summit panel, moderated by Maxime Seguineau (founder and managing partner, Raido Capital), underscored the complexity of building and maintaining successful direct investment programs. As family offices continue to evolve their capital allocation frameworks—moving away from blended public-equity-centric portfolios toward concentrated private market exposure—operational infrastructure, talent availability, and investment process maturity remain critical differentiators between family offices executing direct investing effectively and those encountering execution challenges.
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