There are a number of factors at play to explain this trend.  The current market of low cash and fixed income returns means family offices are turning their attention to other ways of generating yield from alternative investments (i.e. private equity, real estate, debt finance and co-investment deals); the increased recognition of family offices as credible investors in the PE space means great access to deal flow; and family office investors often have the edge over institutional investors (a lack of constraints over investment timeframes and the desire to be more hands on and add value to the business). 

So what opportunities are family offices looking at?  As well as going it alone with their own private equity investments, family offices are looking at co-investment opportunities with other families or institutions.  As recently reported in the FT, one such co-investment opportunity family offices are tapping into are Special Purpose Acquisition Companies (SPACs).  Otherwise known as 'blank cheque companies', SPACs are set up by sponsors to raise capital through initial public offerings for the purpose of acquiring existing companies. SPACs have been around for a long time but in recent years have become more popular.

FT reports that family offices have participated in this boom but to a lesser extent than hedge funds and institutional investors. This is consistent with the approach of family offices more generally to less conventional investing.  It is recognised that family offices are often more nimble investors compared to their institutional counterparts but are often more cautious, relying on personal relationships to support their decision to deploy capital into a particular investment vehicle.  So are family offices dipping their toes into this market rather than diving in?  Yes but this is reflective of the attitude family offices take to investing more generally.  

Family offices have historically been more discrete as investors, to preserve confidentiality and maintain a low profile.  However, as more deals are done, the greater the reputational risk for family offices.  This aspect is becoming increasingly important in the context of co-investing, with premiums being placed on firms with strong ESG processes, to mitigate the risk attached to any deal which a family office gets involved with.  

Like private equity investing, investing in SPACs requires a high level of conviction and trust by the investor. Family offices need to believe the SPAC sponsor has the ability to find the right target company, and tread carefully to manage their reputational risk.  

In the alternative investment space family offices need to surround themselves with an effective team of advisors (including lawyers, accountants, investment managers, and, increasingly, reputational management specialists) who can work with them to navigate these issues if they are to take the plunge and embrace this way of investing.