Why high-net-worth families are turning to direct investments – and how to get it right
High-net-worth (HNW) families and their family offices are increasingly looking beyond traditional portfolios to invest directly in private companies, start-ups and real assets.
About more than just returns, this trend, for many families offers direct investment with greater control, broader asset exposure, enhanced returns and better alignment with family objectives and values.
While direct investments can be rewarding for HNW families, they are not easy money. They are complex, resource-intensive and high-risk without the right structure and advice.
This article explores what’s driving this trend, and how HNW families can manage the risks while capturing the benefits.
The growing appeal of direct investments
HNW families and their family offices can be drawn to direct investments for many reasons, including:
- Greater control: direct stakes allow HNW families influence over strategic direction and decision-making over their investments, unlike passive fund investments or listed securities.
- Enhanced returns:skipping fund fees for management and performance can improve net outcomes, especially or long-term investments.
- Tailored structures: investments can be designed around family goals, risk appetite and timeframes.
- Exclusive access: families can access a wider range of asset clauses, sectors and geographies, including off-market or early-stage opportunities not available to typical investors.
- Value alignment: investments can reflect what maters most to the family, such as sustainability, innovation or community impact and allow them to support sectors or businesses that align with their values.
- Privacy: private investments often remain confidential, unlike listed or public investments.
How to invest smarter
To manage these risks and maximise success, HNW families should:
- Build the right team: whether internally or through trusted advisers, ensure you have the expertise to evaluate, structure and monitor investments. Choose advisers who understand both the technical aspect and the family’s broader goals.
- Establish strong governance: a clear governance framework is essential, especially when multiple generation are involved. Define who decides what, how performance is monitored and how disputes are resolved.
- Invest in due diligence: use robust, tailored processes to assess financial, legal and reputational risks. Checklists and consistency help, but experience matters – especially in sectors new to the family.
- Structure with the future in mind: transaction documents should reflect family priorities, including clear exit terms, succession planning and risk protections.
- Stay actively engaged: ensure ongoing visibility through strong reporting, information rights and be prepared for a hands-on role in performance oversight and relationship management.
Direct investments can offer high-net-worth families greater influence, better alignment with values and the potential for enhanced returns. But they come with complexity, and the stakes are high.
With the right structure, governance and advice, families can not only avoid common pitfalls but also unlock long-term, meaningful value.
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