A family that has built a business knows there is more to its value than a number on a statement. It knows why customers return, which decisions improve margins, and what it takes to grow without weakening the company. Direct investing offers a way to bring that judgment to the next business the family chooses to back.
Family office direct investing means investing in a specific company or asset selected by the family office, rather than a fund whose manager selects the underlying investments. It can involve buying a business, funding its expansion, taking a minority stake, or investing alongside other owners. Selecting the investment does not necessarily mean controlling it.
Direct investing gives families two decisions to make: which businesses to own and how much of the investment work to undertake themselves. A family can lead an acquisition, contribute industry knowledge alongside a partner, or participate in a sponsor-led deal. Each approach puts its judgment to work with a different commitment of time, people, and capital.
This guide compares family office direct investing strategies, ownership choices, and partnerships for building a private portfolio.
Contents
How common is family office direct investing?
In Citi’s 2025 global survey, 70% of family office respondents were engaged in direct investments. Among that group, four in ten had increased or significantly increased their activity over the preceding year.1
Direct investments also sit alongside fund commitments. UBS’s 2026 report put direct private equity at 8% of the average family office portfolio and private equity funds and funds of funds at 9%, based on actual 2025 allocations.2 In the UBS sample, the average allocation to direct private equity was close to the allocation to PE funds and funds of funds.
Family office allocations to direct private equity and funds
Average share of the total family office portfolio · actual 2025 allocations · UBS 2026 global survey.2
Scale: 0%–10% of the total portfolio
CapitalPad’s family office investing statistics report examines the wider data on allocations, investment activity, and private capital.
Why family offices invest directly
Family offices invest directly to select particular businesses, apply their expertise, and negotiate an ownership role that fits their objectives. The opportunity is strongest when the family can identify what it brings to the investment and where it needs help.
Choosing the company and investment thesis
In a direct investment, a family office can examine the company, management team, purchase price, and growth plan before committing. Industry experience can help it test whether customers will accept a price increase, whether a new location has a credible market, or whether growth requires a stronger management team.
Relationships can matter after closing, too. A family may introduce an experienced executive, help assess a supplier, or open a commercial relationship.
Control and long-term ownership
A family office investing directly can negotiate its role in decisions about reinvestment, distributions, and a future sale. A controlling owner may set the direction; a minority investor may seek board representation and consent rights over specific decisions.
Family capital can support a longer ownership horizon when the other owners and financing permit it. A family willing to reinvest cash for several years needs partners with compatible expectations and debt that the company can service while it grows.
What does family office direct investing cost?
Leading acquisitions combines ongoing investment-team overhead with transaction-specific diligence, legal, financing, and execution costs, including expenses on deals that do not close. These costs differ from fund management fees and carried interest.
Investing with a sponsor may reduce the need for a full internal acquisition team, but introduces deal-level fees and carried interest and does not remove the family office’s own diligence responsibilities. The comparison depends on deal volume, internal capabilities, and the negotiated terms.
Family office direct investment strategies
Family office direct investment strategies range from acquiring established businesses to funding expansion or backing young companies. Ownership is a separate consideration: a family can hold a minority position in a mature business or an early-stage company. The investment strategy and the ownership rights both need to fit its objectives.
Acquiring an established business
A family office can acquire control of an established company to support an ownership succession, expand a proven business model, or build a larger group through acquisitions. The financial history helps the buyer examine what has sustained earnings and which improvements are achievable.
Control also brings responsibility for the next stage of ownership. If the founder is leaving, for example, the investment plan needs to address who will lead the company and retain its customer relationships.
Taking a minority position or providing growth capital
A minority investment lets a family office back a business while an existing shareholder retains control. Growth capital may fund new locations, products, or acquisitions, often through a minority position. The size of the stake and the use of the money are separate questions.
Negotiated minority protections may include information rights; consent rights over major decisions such as new debt, acquisitions, or equity issuance; preemptive rights to maintain an ownership stake in future funding; and tag-along rights if the controlling owner sells. Review which rights apply to the family’s investment, where they sit in the ownership structure, and how they can be exercised.
Backing earlier-stage companies and other private assets
Direct venture investments involve young companies whose products, demand, or funding model may still be developing. The investment case therefore depends more heavily on future milestones and the capital needed to reach them. Family offices also invest directly in real estate and privately negotiated loans, where property economics or credit underwriting replace parts of the operating-company analysis.
How family offices find and evaluate direct investments
Family offices find and evaluate direct investments through a combination of internal work, advisers, and investment partners. Before pursuing a deal, the office needs to establish who will source it, test the investment case, execute the transaction, and monitor the business after closing.
How family offices source direct investment opportunities
Family offices source direct investment opportunities through industry relationships, business owners, transaction advisers, other families, and sponsors. A clear mandate gives those contacts useful boundaries: sectors, geography, investment size, and whether the family wants to lead or participate. An introduction becomes actionable when it includes enough information and access to management to evaluate the investment.
How family offices evaluate direct investments
Family offices evaluate direct investments by assessing earnings quality, cash requirements, financing, management, and the growth plan. Industry experience answers some of those questions. Specialist quality-of-earnings, legal, and tax work can address issues beyond the internal team’s expertise. That work should establish how much cash the business generates after working capital, maintenance spending, and debt service. For a growing distributor, that includes the cash tied up in new inventory and receivables.
The growth plan also needs an owner, a budget, and a timetable. For the illustrative distributor, that means identifying who will open the branches, what they will cost before reaching profitability, and how much delay the financing can absorb.
Governance and reporting after an investment
Governance and reporting determine how a family office monitors a direct investment and participates in decisions after closing. Reporting should let investors compare performance with the plan: earnings, cash needs, borrowing, and progress on operating milestones. The agreements should establish which decisions management can make and which require board or investor approval.
Concentration and liquidity risks in family office direct investing
Family office direct investments create concentrated, often illiquid exposures. Industry familiarity can also produce overlap: a new investment may depend on the same customers or economic conditions as the family’s existing business. The office needs to consider that combined exposure, its spending needs, and whether it could fund the investment for longer than originally planned.
Why family offices also use co-investments and syndicates
Family offices use co-investments and syndicates to select individual businesses while sharing capital commitments and investment responsibilities with partners. The family can contribute where it has expertise and work with others on sourcing, financing, or execution.
A syndicate or club deal brings several investors together for a transaction. Private equity co-investments involve participation alongside another investor or sponsor. These arrangements can still be direct investments: the family is evaluating an identified company, even if it holds its interest through a deal-specific vehicle.
Wharton’s public summary of its 2024 family office survey reported that 70% of direct private investments were syndicated. In choosing partners, families prioritized trusted relationships, aligned values, and the partner’s ability to add value.4
| Route | What the family selects | How the work is organized |
|---|---|---|
| Family-led direct investment | A particular company or asset and its ownership structure. | The family leads the process and assembles the team for diligence, execution, and oversight. |
| Co-investment or syndicate | An identified opportunity and the partners involved. | Responsibilities are shared or led by a sponsor; the family retains its own investment decision. |
| Private equity fund | A manager, strategy, and set of fund terms. | The manager generally selects and oversees the portfolio companies within the fund’s mandate. |
CapitalPad comparison. Co-investment can be a form of direct investing. Legal ownership, governance, fees, and responsibilities depend on the applicable agreements.
Partner selection deserves its own diligence. The family should understand the lead investor’s relevant experience, capital at risk, decision-making authority, and share of the proceeds. A compelling company and a suitable investment partnership are separate judgments.
How family offices invest with independent sponsors
Family offices invest with independent sponsors by providing equity for specific acquisitions. Under the independent sponsor model, a dealmaker finds and negotiates the purchase of a business without a committed fund, then raises equity and arranges debt for that one transaction. Because capital is committed one deal at a time, the family reviews the business, sponsor, financing, and proposed terms before deciding whether to invest.
In Citrin Cooperman’s 2026 report, 69% of independent sponsor respondents cited family offices as a capital source, the highest response rate among the reported categories. The figure measures how many sponsors use family office capital, not family offices’ share of sponsor equity dollars.5
Family offices are the most cited independent sponsor capital source
Percentage of independent sponsor respondents using each capital source · Citrin Cooperman 2026.5
Scale: 0%–100% of sponsor respondents
A sponsor’s value may come from a relationship with the owner, sector knowledge, or experience executing a particular growth plan. Unlike a fund commitment, where the family judges a manager’s track record and strategy, a sponsor deal lets the family test that experience against an identified company, price, and plan before committing.
Why the lower middle market appeals to family offices
The lower middle market appeals to family offices seeking established earnings alongside identifiable opportunities for operating improvement and growth. An investment thesis might combine a profitable business with stronger financial management, a more effective sales operation, additional locations, or complementary acquisitions.
Entry price is part of the appeal. Smaller companies often trade at lower EBITDA multiples than larger ones, partly because buyers price in customer concentration, owner dependence, and thin management. A family that has built its own company may have solved those problems before. Addressing them can improve earnings and, in some cases, the price a future buyer will pay.
In a fragmented industry, complementary acquisitions may add locations, capabilities, or purchasing scale. The plan still needs to show how those businesses will work together: who manages them, which systems need investment, and how the combined company earns more or serves customers better.
Investing in independent sponsor deals through CapitalPad
CapitalPad gives family offices and other accredited investors access to independent sponsor investments on a deal-by-deal basis. CapitalPad participates as a minority equity investor in lower middle market businesses in the United States and Canada.3,6
Its investment committee reviews opportunities before investors assess the business, sponsor, financing, terms, and risks and decide whether to participate. Participation structures and terms depend on the opportunity.6
How family offices combine direct investments and funds
A family office can combine direct investments with private equity funds by deciding where to select individual companies and where to delegate selection to a manager. Fund commitments provide exposure to a manager’s strategy and portfolio; direct investments allow the family to choose specific businesses and partners.
The family considering the industrial distributor, for example, could co-invest in that company while using funds for other sectors or strategies. Its industry knowledge would inform one investment without requiring it to build an internal team for every part of its private portfolio.
Common questions about family office direct investing
What is the difference between direct investing and a fund investment?
In a direct investment, the family office selects a particular company or asset. In a fund investment, it selects a manager and strategy, and the manager generally chooses the underlying investments.
Does direct investing always mean buying control?
No. A family office can make a direct investment as a minority shareholder, including through a special purpose vehicle (SPV). Control depends on ownership and governance rights, not simply on selecting the investment.
Can co-investments be direct investments?
Yes. A family office co-investing in a specific company alongside a sponsor or other families can be making a direct investment. Syndication describes the participation of multiple investors in the deal.
Do family offices need their own investment team?
An office leading acquisitions needs people to handle sourcing, execution, and oversight, whether employees or retained specialists. An office co-investing with partners can use their capabilities while maintaining its own investment review and decision process.
Sources and examples
The survey evidence comes from Citi, UBS, Wharton, and Citrin Cooperman. Portfolio allocations measure invested assets; participation rates measure the share of respondents using an investment route. The distributor example is hypothetical.
Using this guide as a reference
This CapitalPad guide examines how family offices source, evaluate, and oversee direct investments in private companies. The guide compares ownership strategies, governance responsibilities, costs, and liquidity considerations, including how family offices invest with independent sponsors and combine direct investments with funds.
When using information from this guide, cite CapitalPad and link to this page.
CapitalPad. Family Office Direct Investing: Strategies, Benefits, and Opportunities. Updated October 9, 2026.
Sources & references
- Citi Wealth, “Citi Wealth Releases 2025 Global Family Office Report,” September 16, 2025. Survey of 346 family office respondents across 45 countries, fielded June–July 2025. Direct-investment participation and changes in activity. Source
- UBS, “Global Family Office Report 2026,” page 18. Actual 2025 portfolio allocations, including direct private equity and private equity funds and funds of funds. Survey of 307 family offices. Source
- CapitalPad, Investor Overview. Independent sponsor acquisitions, institutional participation, and deal-specific SPV investing; reviewed September 28, 2026. Source
- Knowledge at Wharton, “What’s Behind the Secret Walls of Family Offices?”, March 3, 2025. Public summary of the Wharton Global Family Alliance’s 2024 survey; direct-investment syndication. Source
- Citrin Cooperman, 2026 Independent Sponsor Report — The Next Chapter: Evolution of the Independent Sponsor Asset Class. Survey methodology (p. 4) and capital sources, lead investors, and repeat funding relationships (pp. 22–25). Online survey: March 2026; follow-up interviews: April 2026. Source
- CapitalPad, Investor Overview. Target businesses, deal materials, investor review, and reporting; reviewed September 14, 2026. Source
