Family office investments veer towards venture capital and direct investment, survey

During the first six months of 2020, single-family offices managed 611 direct investment transactions worth $15.7 billion, according to proprietary research from Dutch financial services firm, ING.

Despite the economic uncertainty caused by the coronavirus pandemic, family offices plugged $4.7 billion into direct investments by February this year. While levels evened out for March and April at nearly $3 billion, they dropped to around $2 billion by May and June.

In terms of sector preference, family offices made direct investments in healthcare at 19.1% of the total followed by technology at 12.3% during this period. Despite the pandemic’s effect on the leisure sector globally, more transactions occurred in this space during this period at 11%, than in financial services at 10.1% and the impact and philanthropy sector at 9.8%.

Speaking exclusively to Family Capital, Marc Debois, global head of ING’s family office department says family offices were making significant investments in pure software and cloud-related businesses during the first six months. Within health investments, Debois says biotechnology was a popular allocation. Touching on July’s investments generally, he adds it will be a month “with huge investments.”

A report from California based SVB Financial Group, the parent company of Silicon Valley Bank, also revealed a state of investor optimism among family offices, despite the ongoing pandemic.

Entitled, “Family Offices Investing in Venture Capital – Global Trends & Insights Report”, the report found that 63% of family offices included in the study said the pandemic wouldn’t alter their investment decisions. In fact, they said their venture allocations will remain the same or even increase, which could indicate a desire to take advantage of opportunistic deals at this time, such as lower entry valuations in the venture capital world.

Within venture allocations, 91% of family offices reported favouring early-stage venture investments. Within this, 72% of family offices said they provide strategic guidance to young businesses while 70% are active on the board. Another 70% said they offer their investees networking opportunities and access to other investors.

A report from FINTRX in partnership with Schwab Advisor Family Office also points to rising direct investments among family offices this year, with tech investments being especially popular.