Key Takeaways
- • Data from Fintrx's "Q2 Family Office Intelligence Report" show younger, newer family offices show a clear preference for direct investments in private credit and private equity over externally managed funds.
- • Peter Naismith, head of investor representation and partner at McDermott Will & Schulte, says families with investment teams prefer the freedom of direct and co-investing, and that separately managed accounts can give more liquidity or termination rights than commingled funds.
- • Shang Chou of Dishmi Capital frames deals through two tests: whether the family has an access or informational advantage that could generate alpha, and whether the deal structure offers a tax alpha advantage.
- • Small and mid-sized family offices often rely on multi-family-office platforms to offset the overhead of internal deal teams, and both groups are reassessing risk management, exit planning and return expectations.
- • Jeffrey Stevenson of VSS Capital Partners says distributions to paid-in capital are among the biggest factors in manager selection, and UBS's Daniel Scansaroli says families are seeking global and private infrastructure diversification amid AI-related valuation concerns.
Summary
Family offices have long allocated to alternative investments, but as their number and size grow, they are taking a larger role in co-investments, direct investments and other alternative formats. According to Fintrx's "Q2 Family Office Intelligence Report," younger and newer family offices in particular show a clear preference for direct investments in private credit and private equity rather than externally managed funds.
Peter Naismith, head of investor representation and a partner at law firm McDermott Will & Schulte, says families with investment teams tend to value the freedom direct investing provides. "There are returns to be had in private funds, and families feel like they can have more of an impact with direct or co-investments," he said. When families do use external managers, they tend to favor separately managed accounts over commingled funds, which Naismith says can provide more rights over liquidity or termination.
The approach carries operational demands. Direct investments and separately managed accounts require in-house deal teams, and small and mid-sized family offices frequently use multi-family-office platforms to manage that overhead. Both types of offices are re-examining risk management, exit plans and expected returns as portfolio companies face mounting macroeconomic pressures.
Shang Chou, co-founder and managing partner of Pasadena-based multi-family office Dishmi Capital, says many families evaluate opportunities through two frameworks: whether they hold an access or informational advantage that could generate alpha, and whether the deal structure offers a realizable tax alpha advantage. Chou argues that mature alternative asset classes make durable excess returns harder to capture, so families should focus on structural advantages and use hedge funds for diversification or absolute return.
For families working with external managers, the structural focus can mean making fewer commitments and scrutinizing existing relationships more closely. Jeffrey Stevenson, managing partner at New York-based VSS Capital Partners, says families are becoming more prescriptive about their exposures. He notes that distributions to paid-in capital are "probably one of the biggest factors in manager selection right now," and that families are asking more granular questions about exit planning and fund exposures.
Diversification is another priority. Daniel Scansaroli, managing director and head of portfolio strategy and multi-asset solutions in UBS's chief investment office, says this often means going global across listed and alternative assets, with private infrastructure playing a larger role as families seek exposure to the artificial intelligence boom while managing risk. He describes tension around AI, with families wary of missing out on hyperscaler growth yet questioning whether a bubble exists. UBS maintains two specialized groups that advise family offices on portfolio construction and governance, including stress testing and growth-potential analysis across assets held inside or outside UBS, with attention to tax efficiency. Scansaroli notes that trade wars, inflation and kinetic conflicts are adding macroeconomic uncertainty that is prompting some families to adjust their strategies.
Peter Naismith, head of investor representation and a partner at law firm McDermott Will & Schulte, says families with investment teams tend to value the freedom direct investing provides. "There are returns to be had in private funds, and families feel like they can have more of an impact with direct or co-investments," he said. When families do use external managers, they tend to favor separately managed accounts over commingled funds, which Naismith says can provide more rights over liquidity or termination.
The approach carries operational demands. Direct investments and separately managed accounts require in-house deal teams, and small and mid-sized family offices frequently use multi-family-office platforms to manage that overhead. Both types of offices are re-examining risk management, exit plans and expected returns as portfolio companies face mounting macroeconomic pressures.
Shang Chou, co-founder and managing partner of Pasadena-based multi-family office Dishmi Capital, says many families evaluate opportunities through two frameworks: whether they hold an access or informational advantage that could generate alpha, and whether the deal structure offers a realizable tax alpha advantage. Chou argues that mature alternative asset classes make durable excess returns harder to capture, so families should focus on structural advantages and use hedge funds for diversification or absolute return.
For families working with external managers, the structural focus can mean making fewer commitments and scrutinizing existing relationships more closely. Jeffrey Stevenson, managing partner at New York-based VSS Capital Partners, says families are becoming more prescriptive about their exposures. He notes that distributions to paid-in capital are "probably one of the biggest factors in manager selection right now," and that families are asking more granular questions about exit planning and fund exposures.
Diversification is another priority. Daniel Scansaroli, managing director and head of portfolio strategy and multi-asset solutions in UBS's chief investment office, says this often means going global across listed and alternative assets, with private infrastructure playing a larger role as families seek exposure to the artificial intelligence boom while managing risk. He describes tension around AI, with families wary of missing out on hyperscaler growth yet questioning whether a bubble exists. UBS maintains two specialized groups that advise family offices on portfolio construction and governance, including stress testing and growth-potential analysis across assets held inside or outside UBS, with attention to tax efficiency. Scansaroli notes that trade wars, inflation and kinetic conflicts are adding macroeconomic uncertainty that is prompting some families to adjust their strategies.
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