When a Family Office Should Build Its Own Private-Equity Team
Private-equity firms no longer have the same hold on young dealmakers. Family offices now recruit professionals who once followed the established route through PE, offering earlier access to carried interest, direct contact with principals and greater responsibility earlier in their careers.
The employers themselves have multiplied. Deloitte estimated 8’030 single family offices worldwide in 2024, up from 6’130 in 2019, and projects 10’720 by 2030. More family offices now compete for people who know how to originate, assess and execute private transactions.
The competition for talent follows the capital. Swiss family offices allocated 4 percent of their portfolios to direct private equity in 2025 and another 6 percent to private-equity funds. PwC found that Swiss family offices supplied 28 percent of capital raised by local startups in 2024 and accounted for 18 percent of local private-equity deal value.
Families investing at that scale need more than employees who monitor bank mandates and consolidate reports. Direct investment requires people to find companies, assess management, build financial models, negotiate terms, coordinate due diligence and remain involved after completion. A PE hire brings much of that training into the family office on the first day.
The family first needs enough work to justify the hire.
A family completing one direct transaction every two or three years already has access to lawyers, investment banks, consultants, sector specialists and external managers when a deal appears. A permanent investment team converts much of that variable expense into salaries, bonuses and infrastructure costs that continue between transactions.
Frequent direct investment produces different economics. A family that reviews dozens of opportunities, leads several transactions each year or repeatedly acquires controlling stakes uses investment skills throughout the year. Employees retain knowledge from one transaction to the next, develop sector relationships and build a record of what worked after the acquisition rather than assembling another advisory group for each deal.
Senior employees make the fixed-cost calculation expensive. European family-office chief executives now receive total compensation averaging close to €759’000. Investment directors, associates and analysts add salaries, bonuses and long-term incentives before the family pays lawyers, accountants, research providers, data platforms, travel expenses, sector experts and external due diligence.
A CHF 2 million annual investment platform needs enough recurring work to justify CHF 2 million every year. Five transactions across an active pipeline spread those costs across sourcing, execution and portfolio work. One acquisition every two years leaves expensive capacity unused and introduces a less visible risk: the organisation has hired people whose professional purpose is to find investments.
Private-equity firms operate under exactly such pressure. They raise committed capital, employ investment teams and work against an investment period. Their commercial model depends on putting money to work.
Families have no equivalent deadline.
PwC’s analysis of family-office transactions found that PE firms consistently recorded greater investment inflows than outflows, while family offices retained more freedom to hold capital and wait. A large internal deal team starts to narrow that difference. Originators need a pipeline. Investment professionals need transactions through which to demonstrate performance. Compensation tied to deployed capital or completed deals adds another incentive to invest.
The family then faces an unusual compensation problem. It needs to reward a professional who spends six months analysing a transaction and tells the principals not to buy it.
A rejected deal never appears in investment returns, yet avoiding a CHF 100 million mistake creates more value than shaving another 20 basis points from an external manager’s fee. Families building internal investment teams therefore need performance measures that recognise selectivity, portfolio work and capital preservation rather than transaction volume alone.
PE carry does not fit every family
Private-equity compensation creates a second problem when families import it together with the employees.
Carry fits a closed-end fund because the fund has an economic sequence. The manager buys an asset, owns it for a defined period, sells it and distributes the proceeds. Employees participate in realised gains under rules established when the fund begins.
A family often owns businesses differently.
Consider a family office that invests CHF 100 million in an industrial company. Seven years later, the company has paid dividends and its estimated value has reached CHF 180 million. Management continues to perform well, the family likes the sector and no strategic reason exists to sell.
A compensation scheme based only on realised gains leaves the investment team waiting despite seven years of value creation. Paying carry against an internal CHF 180 million valuation creates the reverse problem: employees receive cash against a gain that no external buyer has realised.
Long-term ownership therefore requires its own incentive architecture. Families need to decide how dividends enter the calculation, how they value retained companies, what happens when an employee leaves, how they treat follow-on investments and whether compensation rewards investment performance over five years, ten years or an entire ownership period.
The answer also affects recruitment. Someone expecting traditional PE carry economics has joined a different type of institution when the family intends to own its best businesses indefinitely.
Buying the company is only the first job
PE recruitment often concentrates on transaction credentials: deals completed, sectors covered, returns achieved and firms previously worked for. Those skills matter most before and during an acquisition.
A fifteen-year holding period demands something else after completion.
The investment professional now sits beside questions about board composition, management succession, capital expenditure, acquisitions, debt, dividends, executive incentives and the allocation of capital inside the operating company. A family buying a manufacturing business with the intention of owning it through several economic cycles needs people who understand ownership as well as transactions.
Large PE houses divide these responsibilities among investment committees, operating partners, legal teams, sector specialists and portfolio-management functions. Smaller family offices often place several of them in the hands of two or three senior employees.
The autonomy attracts experienced hires. It also gives each individual more influence over the family’s capital.
Governance needs to expand alongside the team. The principals need written rules covering transaction approval, position size, leverage, follow-on capital, co-investments, conflicts, valuation and the circumstances under which an investment requires outside review. Those rules belong in place before an attractive opportunity arrives, not while the investment director waits for an answer on a live transaction.
Family-office sourcing makes independent challenge especially valuable. Entrepreneurs, banks, advisers, friends, other families and executives from operating businesses all bring opportunities to the principals. Personal access sometimes provides information that an auction process never produces. It also bypasses some of the filters that institutional investors normally apply before a transaction reaches an investment committee.
A former PE professional brings diligence experience into the family office. Someone still needs to challenge the former PE professional.
Build where the family has an edge
Few family offices need an internal team for every private asset class they own. Portfolios already span listed securities, bonds, private equity, real estate, private credit, hedge funds and investments across several regions. Reproducing specialist teams for each strategy turns the family office into an asset manager with a single client.
A family with three generations of experience in Swiss and German industrial companies has a stronger economic case for building an internal manufacturing investment team. Existing sector relationships improve sourcing. Former executives help assess management. The family understands capital intensity, suppliers, customers and industry cycles. It also has experience that remains useful after the transaction closes.
Creating an internal US venture-capital team, an Asian growth-equity desk and a private-credit operation at the same time offers a weaker case unless the family possesses comparable advantages in those markets.
The family’s history earns its place in the investment process only when it improves a decision. Sector relationships, technical knowledge, operating experience and a willingness to hold a good company through several cycles give an internal team resources that an external manager does not automatically possess.
Without them, direct investment risks becoming an expensive attempt to remove the fund manager from the fee line while reconstructing much of the manager’s organisation inside the family office.
Management fees therefore provide an incomplete comparison. The internal cost includes salaries, bonuses, long-term incentives, legal work, research systems, data, travel, external diligence and principal time. The family then needs to measure what it receives for that expenditure.
Transaction access forms one part of the return. Better selection carries more weight. So do stronger terms, better board decisions, useful operating knowledge and the ability to intervene early when an investment goes wrong. Rejecting an overpriced company belongs in the calculation even though the decision never generates an IRR.
The family-office advantage is the right to wait
Direct investment has already moved far beyond an occasional activity for many family offices. PwC recorded family-office participation in 69 percent of global club deals in the first half of 2025, while its database now tracks more than 20’000 family offices. Family capital has become part of the institutional private-markets landscape.
Family offices still differ from PE funds in one valuable respect. Nobody has promised outside LPs that the family will deploy a pool of committed capital within five years.
A family owner gets to leave CHF 100 million in cash when every available transaction looks expensive. It gets to hold an excellent business for twenty years when a sale serves no economic purpose. It gets to abandon a transaction after spending money on due diligence without explaining why committed capital remains undeployed.
The internal investment platform earns its cost when it improves those decisions rather than increasing the number of deals.
The strongest family-office team therefore does not prove its value by staying busy. It gives the family better reasons to buy, better ownership after closing and enough discipline to walk away when the numbers do not work.
Family Office Decision Box
Build internally when the work repeats. A regular pipeline of direct transactions, follow-on investments and portfolio-company work gives permanent staff enough activity to justify fixed costs.
Start with the family’s advantage. Build the team around sectors, geographies or transaction types where the family already has knowledge, relationships or operating experience. Continue buying specialist expertise elsewhere.
Price the whole platform. Compare fund fees with salaries, bonuses, carried interest, legal costs, data, travel, due diligence and principal time rather than comparing management fees with payroll alone.
Define authority before sourcing deals. Set limits for individual transactions, leverage, follow-on capital, conflicts and investment approval before recruiters hire people whose job is to find opportunities.
Design incentives around the holding period. A permanent-capital investor needs compensation that works when a good asset remains in the portfolio for ten or fifteen years.
Pay for saying no. Deal professionals create value when they reject investments as well as when they complete them. Volume-based incentives undermine one of the family office’s strongest advantages: the ability to leave capital undeployed.
Separate dealmaking from ownership. Families planning to hold companies for long periods need portfolio governance and operating expertise alongside transaction skills.
Keep external managers where they retain an advantage. Building one internal capability does not require building all of them.
The relevant hiring question is not whether a former PE professional looks good inside a family office. It is whether the family has enough repeatable investment work, enough genuine advantage and enough governance to make that professional more valuable inside the office than the same capability bought outside it.
