A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.
Many investment firms of ultra-rich families are keen to buy stakes in private companies directly rather than through private equity funds, which come with fees and less control.
Cutting out the middleman can come at a steep cost, though, and requires hiring an in-house investment team to source proprietary deals.
But family offices have found a way to have their cake and eat it too by backing PE funds while investing directly alongside them.
Under these kind of deals, family offices make large fund commitments in exchange for the right to invest additional capital on their own to individual portfolio companies. They typically pay reduced management or performance fees on their co-investments, and the PE fund handles the burden of sourcing and due diligence.
