Introduction
Family offices are increasingly looking beyond traditional fund structures and taking a more direct approach to investing. Recent data shows that 93% of newly tracked family offices have expressed interest in direct investment, while interest in hedge funds is around 10%.
But the real shift is not simply from funds to direct deals. It reflects a broader change in how family offices think about control, access, diversification, and long-term value creation. The choice between direct investments and funds is no longer a simple either -or decision. It is becoming a spectrum shaped by a family office’s governance, investment expertise, deal-sourcing network, and appetite for risk and involvement.
The Base Case of Each Model
- Direct investment means the family office invests directly in a company or asset, without a fund manager in between. This could be equity in a startup, a stake in a private business, or a real estate asset.
The key advantage is greater control. The family office avoids management fee
and carried interest, while having more control over the entry price, investment
decisions, and exit timing. It can also gain direct access to information,
management, and potentially board representation.
- Fund investments place capital with a professional manager who selects, diversifies, and monitors the underlying portfolio. In return, the family office gives up some control and pays a management and performance fee, typically around a 2%-and-20& structure. The trade-off is access to specialised expertise, stronger due diligence, broader deal flow, and diversification that may be difficult for a single-family office team to build independently.
Neither model is inherently better. What has changed is the growing confidence of family offices in pursuing direct investments, along with the way they are approaching and executing them.
What The Global Data Shows
The shift toward direct investing among family offices peaked around 2021, when direct private equity accounted for roughly 13% of portfolio allocations, compared with 8% in funds. By 2025, that had reversed. Direct PE allocations fell to around 8%, while fund and fund-of-fund allocations rose to about 10%, the widest gap in favour of funds in seven years of UBS’s Global Family Office tracking.
Transaction activity tells a similar story. According to PwC, family office deal volumes fell from more than 17,000 in the second half of 2021 to fewer than 7,200 in the first half of 2025.
Yet the underlying intent points in the opposite direction.
Nearly 90% of family offices now have private equity exposure, with around 80% holding both direct investments and fund commitments, according to the 2025 RBC/Campden Wealth North America Family Office Report. Among the newest entrants, the preference for direct opportunities is even stronger. More than 90% of family offices added to FINTRX’s database in Q2 2026 cited direct investment interest, up from roughly 83% a quarter earlier.
Taken together, this suggests that family offices are not moving away from direct investing. The pace of deployment has simply slowed as valuations, deal availability, and market conditions have changed. The preference remains clear: greater control, closer access to businesses, and more selective capital deployment.
The thesis has not changed. The pace has.
The Detail That Changes the Analysis: Co Investment
The key question is not simply “direct vs fund.” It is how a family office wants to participate in a deal. Around 70% of family offices made at least one direct investment in the past year. But most of this activity is not through solo deals. Increasingly, family offices are investing through co-investments and club deals alongside experienced sponsors.
This reflects a shift in approach. Family offices want the economics and access of direct investing, while still benefiting from a sponsor’s sourcing, diligence, and deal expertise.
So, the real choice is often between three models: Solo direct investing, Co-investing with a sponsor, and Investing as an LP in a fund. Each offers a different balance of control, fees, access, diversification, and diligence responsibility. The right choice ultimately depends on what the family office wants to control, what it is willing to underwrite, and how actively it wants to participate in the investment process.
The India Context
India’s family office market has its own distinct character.
Private markets now account for a significant share of family office portfolios, with direct startup investments continuing to attract strong interest. Compared with global peers, Indian family offices have traditionally shown a stronger preference for direct investments, particularly where they can back businesses with conviction and take a closer role in value creation. A newer generation of founder-led family offices, created following significant entrepreneurial exits, is reinforcing the same preference.
But the landscape is evolving. As portfolios become larger and opportunities more complex, some family offices are increasingly turning to AIFs and co-investment structures to access opportunities without building a full in-house investment team.
The direction is becoming clear: Indian family offices are not moving away from direct investing. They are becoming more selective about where to invest directly and where to rely on professional fund managers.
What Should Actually Drive the Choice
Strip away the market noise, and the decision between direct investments and funds comes down to four practical questions:
- Deal sourcing and execution: A family office with strong sector networks and an experienced investment team can have a real advantage in going direct. But without the ability to consistently source, evaluate, and execute deals, the family office is effectively building capabilities that a fund already provides.
- Governance and liquidity: Direct investments are naturally more concentrated and less liquid. Before investing, the family office needs a clear view on how and when it can exit. Without a defined exit thesis, concentration can quickly become a liquidity challenge. A diversified fund can help spread that risk.
- Ticket size and level of influence: Smaller direct investments often come with limited information rights or governance influence. That can weaken one of the biggest advantages of investing directly. Co-investing alongside an established lead investor can often provide access and visibility without requiring the family office to build the entire investment infrastructure itself.
- Fees versus access: Fund fees can look expensive in isolation, but they also pay for sourcing, diligence, execution, portfolio support, and access to opportunities. In sectors where quality deals are difficult to find and highly competitive, paying for that access may deliver better risk-adjusted returns than trying to build the capability internally.
Conclusion
The family offices getting this right in 2026 are not choosing between direct investments and funds. They are building a portfolio where each approach has a clear purpose. Direct investments make sense where they have a genuine sector or operating edge, funds provide diversification and access to opportunities they cannot efficiently source themselves, and co-investments offer a middle ground between the two.
Ultimately, this is less about choosing a model and more about making disciplined decisions. The right mix can change from deal to deal, sector to sector, and across market cycles. For family offices, the real advantage lies in staying flexible enough to know when to invest directly, when to back a fund, and when to do both.
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