Family offices are increasingly attracted to private equity to achieve greater returns to meet long-term investment goals — leading many to launch their own funds.
Just last week, Madison River Capital, the New York-based family office of former Blackstone COO Tony James, launched a private equity fund, raising about $370 million from individual and institutional investors to target companies in the health care, business services and industrial sectors. In January, Sallyport Investments, the Houston-based family office of former energy executive Doug Foshee, launched its first PE fund, raising $160 million.
Overall, 40% of family offices see private equity as a “core component” of their strategies over the next two years, according to a new study from the investment bank Bastiat Partners and the PE firm Kharis Capital. Their appetite for the asset class has risen sharply in recent years — 30% of family offices surveyed by Deloitte in 2023 had investments in private equity, up from 22% in 2021. At the same time, their exposure to public equities fell to 25% in 2023 from 34% in 2021.
The growing interest is driven by private equity’s potential for strong returns, diversification benefits and long-term investment horizons. Madison River’s decision to launch its own fund comes as wealthy families take on greater risks in areas where other investors are pulling back, such as buyout deals and oil markets.
“We’re seeing a real shift in how family offices approach both direct investments and private equity,” said Francois Botha, a strategy consultant for family offices. “As families build up unique capabilities, whether in a specific industry or with deep operational expertise, they realize they can open those deals to others who want exposure to that niche. This collaboration can be informal, semistructured in a network or investment group, or it can take the form of a structured fund that mirrors a PE model.”
Family office investors have increasingly questioned the traditional “2 and 20” fee structure of many private equity firms, Botha said. Private equity exits rose in 2024 to $902 billion from $754 billion in 2023.
“They have the appetite for deeper engagement, more flexible terms — especially as investment and growth periods accelerate — and true alignment of interests, which is driving more direct deals and custom structures,” he said.
Madison River, which manages more than $1 billion in assets, has invested in the health care services firm Senior Care Therapy and made a $70 million equity investment in JDC Power Systems, which provides technical services to data centers.