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August 21, 2018

US family offices failing to tap key private equity opportunities

Around 70% of US family offices are investing in private equity but missing out on smaller deals and opportunities outside the domestic market, according to a survey by Schroder Adveq.

Of those polled, only 35% were found allocating private equity investments to funds specialising in small buyouts.

Why US family offices missing out on smaller opportunities

Schroder Adveq head of buyout investments for Americas Ethan Vogelhut said: “Large buyouts clearly command the most attention, but this leads investors to think this is the preferred or even safest place to find attractive opportunities.

“However, in reality, smaller deals make up the vast majority of the opportunity set for investors, but only 25% of capital goes into these types of deals, offering savvy investors access to an often-untapped and less efficient segment of the market.”

Also, 75% of the family offices believed the US to have the most private equity opportunity over the next year.

On the contrary, only 5% and 6% of family offices in emerging markets and Europe, respectively, held the same view about their markets.

In case of emerging markets, the main areas of concern for respondents were political uncertainty, and lack of experienced private equity managers.

Schroder Adveq head of global VC Steven Yang said: “Investments in China and India on the emerging market side are offering competitive returns. Opportunities in the small to mid-segment of the Asian private equity market, in sectors like healthcare for example have demonstrated strong growth potential. In Europe, we are also finding opportunities in small to mid-buyouts and turnarounds.”

The study also found 30% of respondents not having private equity investments at all.

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