German family offices investing heavily in private markets
German family office wealth is increasingly flowing into the private capital markets. This is shown by the new Private Markets Report 2024 for the German speaking region by data provider Preqin. According to the report, the number of family offices based there has increased almost fivefold over the past five years, from just over 100 to almost 500.
A family office manages the assets of one or more wealthy families. These assets often have an entrepreneurial background. Preqin was unable to say exactly how many family offices there are in total in German-speaking countries. The investment boutique Palladios Partners recently spoke of up to 800 single-family offices in Germany alone, in an interview with Finance-Magazin. This means that roughly speaking, every second German family office could now be investing in the private markets.
Family offices are largest investor group
According to the Preqin report, family offices in German-speaking countries have now become by far the largest investor group for private markets funding. According to the report, there are now more family offices than pension funds and insurance companies investing in venture capital, private equity, private debt, property or infrastructure funds.
However, the Preqin report does not provide any detailed data on asset allocation. It is, therefore, not known how much capital family offices invest in private market funds, nor how their assets are distributed across the individual asset classes.
The years of low interest rates have driven institutional investors in search of returns to the private markets, and the assets managed there to record highs. However, with the return of higher interest rates, new fundraisings with institutional investors are stalling. Many pension funds and insurers are dependent on returns from existing fund investments before they can release money for new fund projects.
Institutional investors are waiting for returns
However, returns are a long time coming, as there are significantly fewer transactions in the current market environment. Private equity investors are shying away from large company takeovers; debt funds are, therefore, unable to finance them, and the property market is also suffering from the rise in interest rates.
Figures from Preqin illustrate this. The fundraising volume has fallen from 43.6 billion euros to around 26 billion euros since 2021. In order to close the funding gaps, managers of private market funds are therefore intensively courting the money of particularly wealthy private individuals – which leads them to family offices.
Private markets hope for family entrepreneurs
According to Preqin, assets under management in Germany totalled around 150 billion euros as of September 2023. Switzerland has 100 billion euros.
Many investors in Austria focus primarily on venture capital and private debt, while the funds in Germany are split roughly equally between private equity, venture capital, real estate and infrastructure. In Switzerland, private equity strategies dominate.
According to Preqin, private capital assets under management worldwide total 15 trillion dollars. By 2028, it is expected to rise to 19 trillion dollars. The data provider describes German-speaking countries as one of the key markets on the way to achieving this. Great hopes are pinned on German SMEs and, in particular, the next generation of family entrepreneurs.
