Private equity is currently a “hot topic” among European family offices, according to a new research conducted by LPEQ, the trade body for European listed private equity companies, and Scorpio Partnership - a finding which echoes a number of recent studies which suggest that high net worth investors are increasingly drawn to the asset class.

According to the study, in which 50 European family office groups were included, 57 per cent of family offices are thinking of increasing their exposure to the asset class over this year and 33 per cent will hold steady with their current exposure. Only 8 per cent of the family offices surveyed said they did not view private equity as a suitable asset class for their family members.

Part of the reason behind this positivity, according to LPEQ and Scorpio, is that a significant proportion of families with family offices have accumulated their wealth through business or entrepreneurial ventures, and these types of investors therefore feel a high level of affinity with private equity as an asset class.

Related to this, the study’s authors suggest that families are keen to maintain their family’s entrepreneurial drive across the generations and private equity investment can be a suitable vehicle to promote this, through, for example, direct investment opportunities where investors can have some influence over how a company is run.

These kinds of considerations, combined with the potential diversification benefits and above-average market returns to be had from private equity investment, provide a solid case for considering the asset class. But the family offices surveyed also highlighted a number of concerns which may undermine its suitability for their clients.

Of the 8 per cent of family offices which felt that private equity was not suitable for their family members, LPEQ and Scorpio found three main objections: clients having specific liquidity requirements; clients already holding illiquid investments, and clients not being comfortable with the risk/return profile of private equity.

While the report’s authors are careful to point out that there is no strict correlation between the business model of a family office and its likelihood to allocate to private equity, the study did identify some broad patterns.

According to the research, a modest allocation to private equity is more common among multiple family offices and private bank family offices due to their conservative, institutional approach to asset management. By contrast, single family offices tend to display a higher level of risk tolerance and hold more “idiosyncratic” portfolios, meaning that a higher allocation to private equity investment might be expected. Indeed, LPEQ and Scorpio found that 60 per cent of the single family offices surveyed allocated upwards of 15 per cent to private equity.

The study’s particular focus was the use of listed private equity investments by European family offices, and here the picture was equally bullish going forward. It was found that over the last year, just 20 per cent of family offices which invest in listed private equity had increased their allocation. However, 45 per cent said that they will increase their allocation to listed private equity over the coming year. As such, a return to pre-crisis levels of investment in listed private equity can be expected, the authors of the report said.