What's Happening?
Family offices, representing the ultra-wealthy, continue to favor direct investments in private companies but are retreating from early-stage and startup funding. A Citi Private Bank survey of 346 family offices revealed optimism about returns, with many expecting 5% to 10% growth in 2025. Despite this, interest in direct deals remains strong, with 70% of offices making such investments. However, enthusiasm for startup and seed funding has waned, particularly among North American offices, which show a preference for growth-stage investments.
Why It's Important?
The shift in investment focus by family offices reflects broader trends in risk management and strategic asset allocation. By favoring direct investments, these offices are capitalizing on specific long-term trends like artificial intelligence and infrastructure demand. The reduced interest in startups may indicate concerns over higher risks associated with early-stage ventures. This trend could impact the availability of funding for startups, potentially slowing innovation and growth in emerging sectors.
Beyond the Headlines
The preference for direct investments aligns with a stock-picking strategy, emphasizing thematic exposure over traditional asset classes. This approach allows family offices to leverage private market opportunities that are not accessible through public markets. The decline in startup funding highlights a cautious stance towards high-risk investments, possibly influenced by economic uncertainties and market volatility.
