US-based CoastEdge Partners LLC and Brazil's Pragma Gestão de Patrimônio led global family offices with the largest allocations to private equity, both exceeding $1 billion, S&P Global Market Intelligence data shows.

CoastEdge Partners' current allocation stands at $2.13 billion, while Pragma has $1.20 billion allocated to the asset class as of Nov. 13. The analysis only includes family offices with available allocation data.

CoastEdge's private equity funds currently in market include Coastedge Private Equity LLC and CoastEdge Venture Capital LLC. Funds that have closed include CoastEdge Opportunity Fund XI LLC, Coastedge Opportunity Fund IX LLC and CoastEdge Arclight VI.

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Median allocation

Geographically, European family offices have the highest median allocation in private equity at 20% as of the end of 2023, according to Preqin. North America and Asia-Pacific follow with a median of 15%, while the rest of the world has median allocation of 10%.

Median allocations across North America, Europe and Asia fell in 2023 after reaching their highest levels in 2020.

Private equity investing benefits and risks

Private equity's return potential is among the top reasons that attract family offices to the asset class, according to a research report from Global Partnership Family Offices (GPFO), an international association providing diversified services to family offices.

"Private equity, in some market conditions, can offer higher returns compared to public markets," Hugo King-Oakley, head of private markets at GPFO, said in an emailed statement to Market Intelligence.

Private equity also provides less correlated returns and exposure to companies not accessible through public markets, potentially enhancing overall portfolio risk-adjusted performance, King-Oakley said. "Emerging sectors like technology, healthcare, and sustainable infrastructure are particularly attractive, offering transformative investment opportunities beyond traditional market segments," King-Oakley said.

Family offices' long-term investment horizon "often aligns with private equity's typical seven-ten year investment cycles, allowing deeper value creation strategies," the executive added.

However, this could also pose a potential liquidity risk when investing in private equity, along with limited secondary market exit opportunities and potential capital call timing misalignment with cashflow or portfolio needs, King-Oakley said.

King-Oakley also noted concerns about the "relative over supply of capital to the asset class, causing inflated asset prices, and potentially depressed returns."