How family offices are transforming to balance growth and sustainability.

For decades, and in some cases centuries, family offices have been entrusted with the preservation of generational wealth. But they’re now fundamentally transforming, as they become increasingly prominent players in an expanding array of investment deals across a wide range of asset classes. In navigating this change of role and remit, they’re also becoming increasingly professionalised and specialised in terms of their investment strategies and processes, often evolving into full-fledged family investment funds.

This annual analysis, in which we provide a thorough analysis of the transactional behaviour of family offices in deals of all types (the full report is available here), underlines their growing importance and influence in the global economy and investment environment. 

As family offices evolve, the term itself is changing. Traditionally categorised into single family offices (SFOs), multi-family offices (MFOs), embedded family offices (EFOs), and virtual family offices (VFOs), real-world practices have introduced new types like principal/family investment offices and family business venture arms. The common factor is that family wealth funds these entities.

Contrary to the belief that family offices are homogeneous and typically created through a "cash event" like a company sale, only 20% result from such events. The remaining 80% continue to draw wealth from active businesses. Most family office owners are entrepreneurs or entrepreneurial families, with only 5% owned by heirs. Increasingly, tech pioneers and hedge fund managers, dubbed "Wall Street billionaires," are entering this space, impacting investment strategies.

Analysing over 11,000 family offices, more than 75% were established since 1993, and about 50% since 2006, indicating they are relatively young entities.

Our analysis, which you can read in detail in this report, was based on data from more than 11,000 family offices worldwide. These are the key trends we identified:

1. A two-year decline in family office investments that began in early 2022 now appears to have bottomed out, with both their deal volume and value now having stabilised.
2. Exits by family offices have predominantly exceeded investments during the past decade. However, the aggregate deal value of these exits has generally surpassed their expenditure on new investments, sometimes significantly – indicating healthy returns.
3. A comparison with private equity investors shows that PE firms consistently record higher investment inflows than outflows, both in terms of deal volume and value. This reflects the constant pressure on PE firms to invest, whereas family offices have greater leeway to park their capital and await the best opportunities.
4. Family offices are major players in funding innovation, being responsible for 31% of investments in start-ups, and with 83% of those executed as club-deals. Generative AI (GenAI) is one of the fastest growing and most popular areas for family office investments in start-ups.
5. Since 2014, family offices have generally shifted their investment focus away from real estate and funds and towards direct investments (i.e. start-ups and M&A). However, over the past two years real estate deals have regained some ground as a proportion of family offices’ overall investments, recording their highest share since 2019.
6. Family offices favour "club deals", where they co-invest alongside other investors. These deals have recently accounted for 60% of their investments by volume.
7. In terms of regional focus, the United States remains the most active target market for family office investments worldwide, with a deal share of 47%. Europe has lost ground recently – with its share falling by 3 percentage points between late 2023 and early 2024 – but remains in second place globally with 32% of all deals.
8. Family offices have been steadily increasing their impact investments over the past ten years. In the first half of 2022, impact investments accounted for more than 50% of their total investments for the first time, and this has been increasing ever since. Education and renewable energy – with 29% and 24%, respectively, of their total impact investments in the year to June 2024 – are family offices’ key areas of interest. By contrast, affordable housing remains underrepresented, with just 4% of total impact investments.

PwC’s research this year confirms that family offices are continuing to transform and evolve their structures, processes, skills and investment behaviours to reflect developments in different asset classes and their own growing maturity as organisations. As in previous years, this evolution – and family offices’ increasing sophistication as investors and stewards of family wealth – is evident both at a macro level across asset classes, and also in their strategies for each individual asset class.

Against this backdrop, PwC’s main takeaways from this year’s analysis are:

• Family offices are becoming increasingly professionalised. This development is most evident in the fact that more and more family offices are building on their success as investors over time, by navigating an evolutionary journey from single family offices to family investment funds. There’s also an interesting contrast with private equity firms, whose balance of investments and exits is significantly higher than for family offices – reflecting the fact that family offices are under less pressure to reinvest the proceeds from exits and are able to take more time in assessing future investment opportunities.
• The shift in family offices’ investment focus away from property and funds and towards direct investments in companies (start-ups and M&A) remains in place, even though there is currently no significant growth in their number of start-up investments, and their volume of M&A deals in early 2024 has been below its level a year earlier. While the share of real estate deals in their overall deal flow has recovered significantly in the past two years, the reality is that start-up investments are currently a more interesting asset class for family offices.
• Impact investing is playing an increasingly important role in family offices’ deal flows, particularly in areas such as education, renewable energy and microfinance. This is part of a clear shift across the global family office community away from "traditional investments" and towards "impact investments".
• The “NextGen effect” is growing. Not surprisingly so given we are in the middle of the largest generational wealth transfer in history. Members of the next generation of family business owners are increasingly interested in a job in a family office – often more so than in the actual operating family business. This rising generation is also more aware and better-informed about new technologies, which helps to explain the increase in investments in start-ups. They also tend to like to invest together with others – possibly with contacts from their university days – which helps explain the increase in “club deals”. This generation also sees itself as committed to a sustainable future, which helps to explain the rising interest in impact investing.

Like the global investment markets and the asset classes within them, family offices are constantly transforming. In stark contrast to their traditional image, they’re increasingly agile, innovative and forward-thinking investors, actively seeking out new opportunities and strategies, and playing an ever more important role in a widening range of markets and asset classes. In a changing world, family offices are a group of investors with their eyes firmly fixed on the future.