How Family Offices Invest: Strategies for Ultra-HNW Portfolios
The term "family office" is used loosely, but it describes a specific model for managing significant wealth: a dedicated investment management structure built around the needs of one family (or a small group of families), with the resources and independence to invest in ways that are simply not available to retail investors.
Understanding how family offices invest — and why their portfolios look so different from a typical ISA or pension portfolio — offers valuable insights for any investor managing substantial wealth. It also raises important questions about which aspects of the family office model are genuinely superior and which require scale that only the very wealthiest can achieve.
Defining the family office universe
A single family office (SFO) is a dedicated entity managing the financial affairs of one ultra-high-net-worth family. It handles not only investment management but also tax planning, estate structuring, philanthropy, concierge services, and sometimes next-generation financial education. The investable asset threshold for an SFO to be economically viable is typically £50–100 million — below that, the cost of the in-house team (CIO, analysts, compliance, administration) outweighs the benefits over external management.
A multi-family office (MFO) serves multiple clients, typically high-net-worth families with investable assets of £5 million or more. An MFO provides the expertise and access of a family office model — including private market investments, bespoke tax structuring, and consolidated reporting — without requiring each client to bear the full cost of a dedicated team. Global Investments operates as a multi-family office, combining institutional-grade investment capability with a personalised service model.
The distinction matters because SFOs have investment capabilities (deal flow, ticket sizes, due diligence teams) that most MFOs and private banks cannot replicate. But the MFO model brings a level of sophistication well beyond retail or even private banking for clients with the right asset base.
The family office allocation model
The typical family office portfolio bears little resemblance to a 60/40 equity-bond allocation. A 2025 UBS Global Family Office Report survey found that the average global family office allocation looked approximately like this:
- Private equity and venture capital: 25–30%
- Public equities: 20–28%
- Real estate (direct + REITs): 12–15%
- Hedge funds: 8–12%
- Fixed income (public): 8–12%
- Infrastructure and real assets: 5–8%
- Private credit: 5–10%
- Cash and near-cash: 5%
This is the endowment model, pioneered by David Swensen at the Yale University endowment over his 36-year tenure. Swensen's insight was that investors with a long time horizon and no need for immediate liquidity should tilt heavily towards illiquid assets, which are systematically underpriced because most investors demand liquidity. Yale's endowment delivered approximately 13.7% per year over the 36 years to Swensen's death in 2021 — far outperforming a simple 60/40 portfolio.
The critical caveat: the endowment model only works if you genuinely do not need the money for 7–10 years. Illiquid assets cannot be sold during a crisis without enormous cost. Families that over-allocated to private markets in 2007–2008 found themselves unable to meet capital calls or rebalance and suffered severe distress.
Private equity and direct investing
Private equity is the single largest asset class in most family office portfolios. The reasons are straightforward: private equity has delivered returns of 3–5% per year above public equity markets over most long-term periods, and family offices have the capital, patience, and due diligence capability to access it.
The family office approach to private equity differs from a retail investor's in two important ways:
1. Fund selection and access. The best private equity funds (Blackstone, KKR, Apollo, EQT, Hg) are not accessible to retail investors and have minimum commitments of $5–25 million. Family offices with established relationships can access these funds and often negotiate preferential terms (reduced management fees, co-investment rights).
2. Direct co-investment. Rather than always investing via a fund (which charges a management fee of 1.5–2% and a carried interest of 20% of profits), larger family offices increasingly co-invest directly alongside PE funds in individual transactions. They contribute capital to a specific deal — a management buyout, a growth equity investment — without paying the full fund fee structure. Co-investment reduces the total cost significantly: instead of paying 2% + 20%, a co-investor might pay 1% + 10% or even fee-free for a preferred co-investor relationship.
Direct investing requires: deal flow (origination relationships with investment banks, PE firms, and management teams); due diligence capability (an experienced CIO and deal team); sufficient capital (minimum $5–10 million tickets for meaningful direct investments); and the legal and tax structuring expertise to execute complex transactions.
Private credit: the yield enhancement
Private credit — direct lending to businesses that are too large for bank overdrafts but too small or complex for public bond markets — has grown dramatically since 2008–2010, when banks retreated from leveraged lending. Family offices were early adopters.
The core proposition: floating-rate loans (linked to SONIA or SOFR) to mid-market businesses, secured on assets and with strong covenant protection, yielding 8–12% per year. In a world where public investment-grade bonds yield 5–6%, private credit offers a significant yield premium — the "illiquidity premium" and "complexity premium."
Private credit within a family office portfolio typically includes:
- Direct lending: Senior secured loans to businesses with revenues of £50m–£500m
- Real estate debt: Senior and mezzanine loans against commercial and residential property
- Infrastructure debt: Loans to infrastructure assets (solar farms, roads, data centres) with inflation-linked revenues
The risks: lower liquidity than public bonds (loans cannot be sold easily); credit risk (default rates in private credit are low but not zero); vintage risk (lending at the peak of the cycle means inferior terms); and manager selection risk (the skill of the credit manager matters greatly in this less-efficient market).
Hedge funds: declining but still relevant
The family office allocation to hedge funds has declined from its peak (15–20% in the 2000s) to approximately 8–12% in recent surveys. The reason: many hedge funds failed to justify their fees (typically 2% management + 20% performance) given their actual risk-adjusted performance.
Hedge funds remain relevant in family office portfolios for two reasons:
Genuine diversification: A well-managed macro hedge fund (betting on global interest rate and currency trends) or a market-neutral equity fund (long/short with low net exposure) truly does not correlate with equity and bond markets. This diversification is valuable in a 2022-style scenario where both equities and bonds fall simultaneously.
Access to talent: The best hedge fund managers are among the most talented investors in the world. Family offices with longstanding relationships (and sometimes direct co-investment rights) can access these managers and their returns.
The minimum commitment for top-tier hedge funds is typically $5–25 million. Selective allocation to two or three genuinely uncorrelated strategies is more valuable than broad diversification across 10–15 mediocre funds.
Tax efficiency as a first-order priority
Family offices do not treat tax planning as a secondary consideration. Tax efficiency is integral to every investment decision, from day one. The structures used include:
- Offshore investment bonds: For non-UK domiciliaries or families with multi-jurisdictional exposure, an offshore investment bond (Isle of Man, Luxembourg, Dublin) provides a tax-deferred wrapper where growth rolls up free of annual UK tax.
- Family investment companies (FICs): A UK corporate vehicle that holds investments, allowing income to be taxed at corporation tax rates (25%) rather than income tax rates (45%) and capital to be distributed via dividends or on wind-up.
- Charitable structures: Donor-advised funds, charitable remainder trusts, and private foundations allow family offices to combine philanthropy with tax efficiency (Gift Aid, inheritance tax relief).
- Trust wrappers: Discretionary trusts and excluded property trusts can provide inheritance tax protection for non-UK domiciliaries.
The tax treatment of any investment is considered before the investment is made, not as an afterthought.
Governance: the investment committee model
Family office investment governance typically centres on a formal Investment Committee (IC) that meets quarterly to:
- Review portfolio performance against benchmarks and absolute return targets
- Approve new investments above a defined size threshold
- Review and update the Investment Policy Statement (IPS)
- Assess portfolio risk (concentration, liquidity, currency, leverage)
The IC typically includes: the CIO; one or two family principals (not all family members — avoiding committee paralysis); and at least one independent external adviser. The independence of external advisers is important: they provide challenge and prevent groupthink, particularly in family dynamics where challenging the principal's views can be professionally awkward for employees.
Performance attribution — understanding precisely which decisions added or subtracted value — is a discipline that separates professional family offices from those that are simply fortunate.
The value of investments and the income from them can fall as well as rise. Illiquid investments carry additional risks. Past performance of any investment model is not a reliable indicator of future returns. This guide is for information only and does not constitute financial advice. Tax treatment varies significantly by jurisdiction and individual circumstance.
How Global Investments can help
Global Investments has 32 years of experience working with high-net-worth families and internationally mobile professionals to structure and manage sophisticated investment portfolios. For clients whose wealth has grown to the point where a simple retail investment approach is no longer adequate, we provide access to the investment strategies, asset classes, and tax-efficient structures that larger family offices employ — at a scale that is appropriate for your individual situation.
Contact us at globalinvestments.net to discuss how we can build a family office-style investment framework around your wealth.
This guide is for general information only and does not constitute financial advice or a personal recommendation. The value of investments can fall as well as rise and you may get back less than you invest. Past performance is not a guide to future returns. Tax rules, investment regulations, and the availability of specific investment vehicles change — always verify current rules and seek advice from a qualified independent financial adviser before making any investment decisions.