According to Goldman Sachs1, an average of more than 40% of a family office’s portfolio is now allocated to alternatives (e.g. private equity, private real estate and infrastructure, private credit, and hedge funds). Appetite for asset classes like these has been on an upward trajectory for the past decade and commitments of this level demonstrate how firmly private markets have become embedded in family office portfolios.
Maximising opportunity and returns in private markets often requires different sourcing networks, diligence processes and portfolio construction from those used in traditional public markets investing. As allocation appetite increases, Family offices must therefore consider how their internal team’s capabilities evolve as allocations increase, and whether expanding internal resources or working with trusted external relationships best supports their objectives by deepening knowledge and broadening access.
In this article we look at how family office investment strategies align with private markets, what has driven the shift towards them, and the ways these investors access, structure and manage private market exposure effectively.
Macro context: what's responsible for the shift to private markets?
The shift to private markets has not happened by accident. Several structural forces have reshaped the investment landscape over the past decade. One of the most obvious is that public equity markets have become increasingly concentrated by company and risk exposure. For example, on America’s S&P 500, the so-called ‘magnificent seven’ mega-cap stocks (including Microsoft, Amazon, Tesla and Apple) account for roughly 35%2 of the entire market capitalisation of the index. This reliance upon so few companies means less diversification, making portfolios more vulnerable to shocks.
Another long-term trend is that many growth-stage and founder-led businesses are choosing to remain private for longer, supported by deeper pools of capital in private markets. As a result, a meaningful portion of value creation now occurs before companies reach public markets, if they even list at all.
Thirdly, private markets themselves have also matured. What were once niche strategies have become proven and institutionalised.
Private credit has developed into a standalone asset class with structured downside protections making it attractive to those investors looking for diverse capital preservation strategies in a less crowded market space.
Further up the risk/return curve, private equity secondary markets have grown exponentially in the past five years3. This strategy can offer attractive entry pricing opportunities in mature private equity assets in exchange for the liquidity provided to primary investors.
As a result of its maturation, the opportunity set in private markets is broader and more sophisticated than ever before. Accessibility has improved, too, but larger allocations and easier access also increase the potential risk of making mistakes.
For family offices seeking diversification, downside structuring and exposure to entrepreneurial value creation, private markets provide tools that public equities and bonds cannot easily replicate. Navigating this broader opportunity set requires careful selection, disciplined portfolio construction and access to reliable deal flow.
Why are private market investments particularly interesting to family offices?
Unlike pension funds or insurance companies, family offices are not managing defined liabilities or regulatory capital constraints. Nor are they operating with the capital limitations or liquidity sensitivities that affect smaller investors. In most cases, they are free from short-term redemption pressure and benchmark-driven mandates. This flexibility allows them to deploy capital counter-cyclically, underwrite illiquidity and hold assets through periods of volatility without being forced sellers.
Private markets therefore offer not only higher return potential, but access to operational value creation, niche strategies and long-duration cash flows that map naturally onto multi-generational capital.
How do family offices access private markets?
Family offices typically engage private markets through managed funds, direct investments and co-investments. Each route requires different networks, resource and expertise.
Managed private equity and private credit funds
Private equity and private credit funds operated by professional managers remain the core exposure route for many family offices. Funds offer diversification, specialist underwriting expertise and portfolio construction discipline.
However, access to top-performing managers is competitive. Capital alone is not always sufficient to secure allocations. Established relationships, track record and reputation often determine entry to oversubscribed funds. Even where access is achieved, manager selection is only the first hurdle. Portfolio construction across vintages, strategies and geographies requires pacing discipline and continuous monitoring. Replicating the underwriting depth and portfolio analytics of large institutional LPs can prove challenging for leanly staffed offices.
Direct investments
Investing directly in individual businesses appeals to entrepreneurial families, particularly where prior operating experience exists. Direct investments offer potential for concentrated returns and strategic influence.
Building a repeatable direct investment capability requires internal sourcing networks, due diligence expertise, transaction execution skills and ongoing portfolio oversight capacity. Direct investing also introduces concentration risk and governance responsibility beyond the initial underwriting stage. Board participation, performance monitoring and exit planning demand sustained attention.
Research from UBS, Campden Wealth and other global surveys consistently highlights wide variation in governance frameworks and internal resources across the family office landscape. While some offices operate institutional-style teams with formal investment committees and underwriting processes, others rely on lean structures, external advisers or consensus-driven decision-making.
Co-investments
Co-investment deals led by third-party private equity or private credit sponsors sit between funds and direct investments. They offer fee efficiency and enhanced transparency at the transaction level. However, they require established sponsor relationships, pre-agreed decision frameworks and access to robust diligence resources. Sponsors expect timely underwriting decisions, often within compressed timeframes.
Without dedicated internal capacity or clearly defined governance processes, family offices may find themselves unable to evaluate opportunities sufficiently quickly — or may take decisions without the full depth of analysis that institutional investors would apply. Even with all the necessary building blocks in place, sifting a larger number of co-investment deals for the most appealing is a significant value-add.
Structuring private market exposure effectively
The most effective private market programmes tend to share certain characteristics.
They define target allocations across complementary strategies rather than approaching opportunities piecemeal. They adopt governance processes aligned with internal capabilities. They combine selective manager relationships with disciplined pacing and cross-vintage portfolio monitoring. They retain flexibility to evolve as objectives and generational dynamics change.
Achieving this consistently is resource-intensive. It requires coordinated oversight of capital calls, liquidity planning, manager performance, risk concentration and cross-strategy exposure. As private market allocations approach or exceed 40% of total portfolios, the complexity of oversight begins to resemble that faced by institutional investors — yet family offices typically operate with much leaner teams.
The challenge for many lies not in conviction, but in coordination. Campden Wealth reports that fewer than half of all family offices operate with a fully formalised investment committee structure. As allocations expand, less formal governance models can struggle to accommodate pacing decisions, liquidity management and cross-strategy risk oversight.
The constraints of limited team bandwidth can lead to fragmented GP relationships, inconsistent deal flow, onerous administrative burden and limited transparency across vintages. Overexposure to individual managers can coexist with under-deployment at the portfolio level. Complexity compounds as private market allocations grow.
The differentiator is no longer access alone. It is the ability to integrate sourcing, underwriting, portfolio construction and governance into a coherent framework. For many family offices, the question is not whether private markets are appropriate, but whether their internal structure is designed to manage private capital at its current scale. Where it is not, thoughtful external alignment can become an increasingly important component of a scalable private markets strategy.
Many family offices therefore combine internal investment oversight with specialist platforms that expand sourcing capabilities, streamline due diligence and provide structured access to private market opportunities.
What are the risks of investing in private markets?
Investments in private markets carry significant risks including illiquidity (investments should be considered as long-term holds); potential concentration risk requiring careful diversification; performance variability between managers and vintages; and potential total loss of capital. Company performance can fluctuate substantially, and unlike public markets, investors cannot exit positions quickly when circumstances change. Therefore, Investors should bear in mind that there are no guarantees of returns, they may not be protected if something goes wrong and they should not invest unless they are prepared to lose all of their money
Sources
- Goldman Sachs whitepaper: Adapting to the Terrain - Family Office Investment Insights 2025.
- Morningstar (December 2025)
- CVC: Secondaries in the spotlight (2025)