LIVE EVENT
GCN Investor Conference in Newport Beach, CA
MARCH 25 · NEWPORT BEACH, CA
LIVE EVENT
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Family offices face a genuine strategic decision most institutional investors don't: whether to build the internal capability to source and evaluate direct deals, or to access private markets primarily through fund commitments instead. Both paths are legitimate, and the right answer depends heavily on the office's size, resources, and appetite for active involvement.
Investing through funds gives a family office access to a professional manager's sourcing, diligence, and portfolio construction without needing to build that infrastructure internally. For smaller offices, or those without deep sector expertise in venture and private equity, this is often the more efficient path — you're paying for expertise you'd otherwise need to build from scratch.
Direct investing avoids fund-level fees entirely, gives the office full control over which specific opportunities it takes, and can offer meaningfully higher returns when the office genuinely has the expertise and network to source and evaluate deals well. Many family offices have built real direct investing capability over the past decade, particularly larger, more sophisticated ones with dedicated investment staff.
Many family offices land on a blended strategy: fund commitments for broad market exposure and access to sectors where the office lacks internal expertise, combined with direct deals in areas where the family has genuine domain knowledge or relationship advantages. This captures much of the benefit of both approaches without over-committing to either.
The biggest practical difference between the two paths is people. A fund program can be run by a small team focused on manager selection, monitoring and reporting. A direct program needs people who can source companies, negotiate terms, sit on boards or act as observers, and support portfolio companies through follow-on rounds and exits. Offices that start direct investing without that capacity often end up relying on co-investors to do the real work, which removes much of the advantage of going direct.
Direct deals put investment decisions inside the office, so the decision process needs to be clear. Useful questions to settle in advance include:
Writing these rules down before the first deal helps avoid decisions driven by relationships or enthusiasm rather than discipline.
Fund diligence focuses on the manager: track record, team stability, strategy, terms and operational controls. Direct diligence focuses on the company: market, product, financials, legal structure and founders. Many offices apply rigorous standards to fund managers but a lighter touch to direct deals they hear about through personal networks. Applying the same discipline to both — or using trusted external advisors where the office lacks expertise — is one of the simplest ways to improve outcomes.
Fund commitments are diversified by design, since each fund holds many companies. A direct program builds diversification one deal at a time, so concentration risk is higher, especially in the early years. Direct investors also need to plan for follow-on rounds, which can require as much capital as the first check.
For example, imagine a hypothetical office with $50 million allocated to private markets. It might commit $30 million across several funds for broad exposure, reserve $15 million for direct deals in sectors where the family has real expertise, and keep $5 million for co-investments offered by its fund managers. Within the direct portion, it might plan for around ten companies with similar initial checks, holding roughly half of that capital back for follow-ons. The exact split will vary, but the logic — broad exposure through funds, targeted bets where the office has an edge — holds for many offices.
For the founder's side of this relationship, see Family Offices vs. Venture Capital: Which Is Right for Your Startup.
Generally, yes to a meaningful degree — the infrastructure and deal flow access required makes direct investing more practical for offices with dedicated investment staff and real deployment scale, though smaller offices can participate through co-investment structures alongside funds.
Often through curated investor networks and events that provide access to vetted opportunities without requiring the office to build sourcing infrastructure from scratch.
Typically yes within a private markets allocation, which is why many offices deliberately split the allocation between the two approaches rather than choosing one exclusively.
Neither direct deals nor fund commitments are universally better — the right mix depends on the office's size, expertise, and appetite for active involvement. Explore our investor network for curated direct deal access.
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