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Authored by Karin Mugnaini and edited by Marc J. Sharpe, M.A., M.Phil., MBA

Executive Summary

Family offices operate at the intersection of wealth, governance, and legacy. In this environment, negotiation is not a discrete skill but an operating system—a disciplined, repeatable approach to decisions with generational consequences. Traditional, consensus-first models can falter when confronted with entrenched histories, power asymmetries, and identity-driven differences, leading to delays, vague compromises, or short-term harmony at the expense of long-term misery.

This whitepaper presents a structured negotiation framework tailored to single- and multi-family offices. Drawing on principles from high-stakes negotiation practice, it offers preparation methods, process design, and leadership behaviors that can transform friction into clarity. Here we map the negotiation landscape within family offices, explain why common approaches often underperform, and provide a practical playbook with real-world examples.

We also integrate insights from the broader literature and practice community. While formal research specific to family offices remains nascent, there is accumulating knowledge from family business governance and professional practice that illuminates how families negotiate complex, emotionally charged decisions. We synthesize these insights within a single narrative so leaders can apply them— thereby preserving relationships while achieving durable, strategic outcomes.

Introduction

Decisions within a family office often ripple across generations, shape governance standards, influence cohesion, and become part of a family’s story and legacy. While some family offices may only resemble sophisticated investment organizations, the context in which they negotiate is distinct: outcomes are rarely ‘just financial’ and frequently entail personal, reputational, and multi-generational dimensions.

This magnifies the stakes and complicates the process. Negotiation must balance measurable outcomes with deeply human considerations—recognition, fairness, dignity, and control being just a few among them. Decisions stretch well beyond quarterly horizons and determine stewardship models, intergenerational transitions, and how a family’s values are presented over time.

Therefore, the practical question is how families can make high‑quality decisions, with diverse stakeholders, often under considerable pressure, and in environments where multiple ‘right answers’ may exist. The structured approach outlined here offers a disciplined path that holds complexity without defaulting to avoidance or superficial agreement.

Understanding the Family Office Negotiation Landscape

Family offices vary widely in mandate, scale, and governance structure. Some solely emphasize investments and risk management; others integrate a much broader set of activities, including estate planning, philanthropy, lifestyle management, education for next‑generation members, and the stewardship of family identity. All must align decision‑making across personal, financial, and legacy priorities.

At a practical level, this dual role—financial stewardship alongside personal and legacy stewardship—creates a negotiation environment that is uniquely complex. Money intersects with meaning. Structures designed for efficiency must coexist with relationships defined by history. Formal decision rights meet informal influence. In this context, negotiation is a strategic leadership function rather than a series of one‑off tactics.

Stakeholders and Incentives

Stakeholders encompass family principals and wealth creators, next‑generation members, non‑family executives, trustees and fiduciaries, investment committees and advisory boards, operating company leadership, and a constellation of external professionals such as asset managers, wealth advisors, bankers, lawyers, tax advisors, auditors, and technology providers. Each brings distinct incentives, authority levels, and communication norms. Effective negotiation requires fluency across these differences. Soft skills matter as much as technical acumen: the capacity to listen, to separate substance from emotion, and to structure conversations so difficult topics can be addressed constructively is essential.

Common Negotiation Arenas

Negotiations in family offices occur routinely and often out of public view. Internally, leadership addresses compensation, budgeting, resource allocation, investment mandates, governance design, and succession or hiring decisions. Within the family, discussions span distribution and liquidity policies, ownership transitions, next‑generation roles and readiness, oversight of operating companies, philanthropic vision, and alignment of investment philosophy across generations. Externally, offices negotiate direct investment terms, manager selection and economics, co‑investment agreements, vendor and technology contracts, real estate transactions, and dispute resolution. Despite their variety, these negotiations share two characteristics: deeply human dynamics and typically long time horizons. Decisions are not only about price or terms; they concern identity, recognition, fairness, and the preservation of relationships that must endure well beyond a single transaction.

Why Traditional Approaches Often Fall Short

Consensus-first models and techniques focused primarily on mutual gains may have value in less difficult negotiations but can be insufficient in family offices where emotional history, ambiguous mandates, and asymmetric power interact. The desire to preserve harmony can lead to the avoidance of difficult topics, reliance on vague compromises, or decisions that placate in the short term but undermine long‑term strategy. Family office decisions frequently present multiple valid pathways. When there is no single ‘correct’ answer, attempts to force consensus can produce unstable outcomes. A structured approach addresses this by focusing on process clarity, disciplined preparation, assembling the optimal negotiation team, and deliberate choices among several acceptable end states—including agreement, deadlock, escalation, or non‑agreement when integrity requires it.

Principles from High‑Stakes Negotiation Practice

Negotiation methods developed for high‑pressure environments translate directly to family offices. They emphasize planning, behavioral awareness, and clarity under pressure. Four components are particularly useful: preparation, opening, leadership, and closing (the Schranner Concept®). The mindset advised in difficult situations is one of positivity with courage and the willingness to “play to win”. Splitting differences and seeking win-wins is not recommended, as such outcomes risk causing resentment or failures after the negotiation. Rather, applying a focus on embracing the conflict early on, clearly and with confidence, can better ensure long-term success once the parties have left the table.

1. Preparation: Map Interests, Behaviors, and Constraints

Preparation anchors effective negotiation. In a family office, it requires an expanded lens that accounts for personal, financial, and legacy interests; behavioral tendencies; decision rights and governance boundaries; emotional context; timing pressures; and internal alignment or misalignment. Preparation should culminate in a ‘demand list’—a structured articulation of what must be achieved, what is desirable, and what is unacceptable. Unlike a wish list, the demand list guides disciplined decision‑making and ensures that concessions and escalation pathways are planned rather than improvised.

2. Opening: Establish Structure, Roles, and Boundaries

The opening phase sets tone and process. Before substance is discussed, the parties should align on the agenda, roles, decision rights, and how the discussion will unfold. In family office contexts, where relationships run deep and emotions may be close to the surface, separating personal connection from negotiation time is essential. Compiling the strongest team is critical, as is identifying clear roles for each team member. In this context, the FBI model can be extremely helpful:

• Decision Maker – not present at the negotiation but holding authority

• Commander – observant, mostly silent, looking at the big picture

• Negotiator – with the license to negotiate, active in the negotiation

• Expert – mostly available on the sidelines for additional information and guidance

Explicit process agreements—what is in scope, how decisions will be recorded, when breaks will occur, how communication to each party’s internal teams will be handled—protect relationships and prevent unspoken expectations from derailing substance.

3. Leadership: Manage Friction, Emotion, and Complexity

In complex negotiations, friction is not an obstacle; it is a leadership responsibility. Process leaders maintain control, remain calm under pressure, and use friction strategically rather than avoiding it. Behavioral insight helps decode reactions and motivations. Deliberate pauses restore productivity when tension escalates. Neutral facilitation may be appropriate when role clarity is at risk. The aim is to channel conflict toward clarity and progress, not to eliminate it.

4. Closing: Choose Among Multiple Valid Outcomes

Closing does not always mean agreement. High‑quality outcomes include agreement (when interests align and commitments are clear), deadlock (a deliberate pause to gather information or recalibrate), escalation (used strategically when leverage needs to shift or additional authority is required), and non‑agreement (acceptable when it protects long‑term integrity). Recognizing the legitimacy of these outcomes reduces pressure to force consensus and prevents unstable or unclear decisions.

How Structured Negotiation Supports Family Office Goals

A structured process protects relationships without sacrificing clarity. Boundaries, agendas, and decision rights separate emotion from substance, enabling candid communication with minimal unintended harm. Durable decisions align personal, financial, and legacy interests. Structured negotiation brings these into the open rather than leaving them implicit, ensuring outcomes respect both quantitative goals and qualitative values.

Complexity can become an advantage. Tensions across generations, risk tolerances, and worldviews stimulate innovation when managed deliberately. Structured methods transform competing perspectives into productive friction that surfaces better options. Clear process design enhances governance and decision‑making efficiency. Agreements reached through disciplined negotiation are more likely to be actionable, auditable, and executable. And preparation and process control strengthen external positioning. Discipline reduces concession drift and maintains strategic focus with sophisticated counterparties.

A Practical Negotiation Playbook for Family Office Leaders

1. Define the situation. Clarify the decision to be made, the stakeholders involved, relevant governance rules, timing constraints, and how the decision will be recorded.

2. Identify the real conflict. Surface disagreements often mask deeper issues—fairness, identity, recognition, control, or legacy. Locating the real issue prevents repetitive debates over symptoms rather than causes.

3. Develop the demand list. Document non‑negotiables, priorities, and unacceptable outcomes. Plan concessions and escalation paths in advance to protect against improvisation in high‑pressure moments.

4. Build the strategy. Map potential concessions, anticipate emotional responses, define walk‑away points, and identify decision checkpoints. Consider which outcomes—agreement, deadlock, escalation, non‑agreement—would be acceptable under which conditions.

5. Lead the negotiation. Maintain structure and role clarity. Separate emotion from process without dismissing it. Use friction constructively, and call deliberate pauses when tension is unproductive. Bring in neutral facilitation when appropriate.

6. Close deliberately. Choose among the legitimate outcomes based on long‑term impact rather than short‑term comfort. Document commitments and follow‑up actions to ensure execution.

Negotiation in Practice: Real‑World Case Notes¹

Case Note 1: Long‑Horizon Ownership Negotiation in Luxury Hospitality

Across more than two decades, the ownership of Four Seasons Hotels and Resorts illustrates how family offices negotiate complex control and governance questions in partnership with founders and strategic co‑owners. After taking the company private in 2007 with aligned partners and a court‑approved plan of arrangement, a Cascade Investment affiliate negotiated in 2021 to acquire a controlling stake at a US$10 billion enterprise value. The structure reaffirmed founder Isadore Sharp’s stake and preserved strategic direction—showcasing disciplined valuation framing, fairness processes, and governance continuity in sensitive control negotiations.

Case Note 2: Taking a Listed Group Private to Reduce Strategic Friction

In 2023, the Rothschild family’s holding company announced a simplified tender offer to take Rothschild & Co private at a premium to market, coupled with ordinary and exceptional distributions. Independent board oversight, financing coordination and AMF engagement—together with a consortium of long‑horizon families—illustrate structured negotiation that reconciles minority‑holder economics with legacy control and confidentiality.

Case Note 3: Defensive Negotiation and Family Unity at Hermès

When a competitor accumulated a significant stake in Hermès in 2010, the sixth‑generation family responded with an integrated defense—tightening ownership through a family holding vehicle and reframing the dispute as a cultural and governance question. The counter‑strategy emphasized unity, narrative clarity and legal process, preserving independence and highlighting how control structures and time locks can reweigh bargaining power.

Case Note 4: Co‑Investment Rights and Side‑Letter Negotiations

As family offices expand direct and co‑investing, negotiation shifts to deal architecture. Side‑letter terms—information and reporting rights, most‑favored‑nation access, tailored fees, governance roles and opt‑outs—can materially reshape economics and influence. With evolving private‑fund rules on preferential treatment, disciplined preparation and enforceable drafting are essential to align protections with primary agreements.

Case Note 5: Purpose Trusts and Philanthropy—Patagonia’s Transition

In 2022, Patagonia’s founder and family transferred all voting shares to a purpose trust and 98% of non‑voting shares to the Holdfast Collective, structuring all non‑reinvested profits for environmental aims. The multi‑entity design balances governance continuity (via a controlling purpose trust) with philanthropic deployment (via a social‑welfare entity), demonstrating how families can negotiate ownership, purpose and political constraints while protecting values and long‑term intent.

Case Note 6: Foundation‑Owned Governance—IKEA/INGKA Structure

To secure longevity and charitable impact, Ingvar Kamprad established an independent foundation‑owned structure in which INGKA Foundation owns Ingka Group and funds the IKEA Foundation. Family participation is capped within boards, and assets are reserved solely for charitable purpose. The model highlights negotiation of governance across generations: independence from private benefit, clarity of decision rights, and a funding pipeline that aligns enterprise performance with philanthropic commitments.

State of Research and Theory

Formal academic study of family offices remains nascent compared with the extensive literature on family‑owned operating companies. Much of what exists focuses on governance, succession, and socio‑emotional wealth in family firms rather than the negotiation mechanics of family offices.

Empirical work is constrained by the privacy of family offices and the difficulty of accessing data when conflicts and decision processes are largely confidential.

What we do know: conceptual work and practitioner insight converge on several points—family offices are distinct organizational forms; conflict arises predictably around control, fairness, and legacy; and structured processes reduce the likelihood that disagreements escalate or ossify. While negotiated outcomes are often specific to context, process quality consistently correlates with durability and relationship health.

Where the gaps remain: rigorous, comparative evidence on how family offices negotiate across issues such as asset allocation mandates, co‑investment governance, inter‑generational transitions, and philanthropic strategy is limited. Standardized frameworks that integrate power asymmetry, behavioral dynamics, and escalation design into practice are needed. This whitepaper contributes a practical synthesis aligned to those needs.

Examples of Structured Principles at Work

Succession planning often surfaces identity and legacy concerns alongside technical readiness. Structured preparation, including a shared demand list and explicit role definitions, creates clarity where emotion previously dominated. A staged transition plan with governance checkpoints can align expectations, protect continuity, and provide the next generation with meaningful responsibility well before formal handover.

Family and non‑family executive dynamics can suffer when decision rights and performance expectations are ambiguous. Controlled openings that separate personal connection from negotiation time, coupled with explicit mandates and measurable objectives, reduce pressure on both sides. When friction arises, neutral facilitation and deliberate pauses can re‑center the discussion on structure rather than personality.

Negotiating with external investment partners requires discipline commensurate with counterparty sophistication. Behavioral analysis of incentives—economics, reporting obligations, fundraising cycles—prevents concession drift. Pre‑planned escalation pathways, such as involving the investment committee or adjusting mandate scope, preserve leverage without jeopardizing long‑term relationships.

Aligning investment philosophy across generations demands a forum where risk tolerance and worldview differences can be translated into policy. By articulating shared objectives—return, resilience, and impact—and agreeing on governance mechanisms such as allocation bands, veto rights, and rebalancing rules, families can reconcile divergent preferences without eroding trust.

Distribution and liquidity policies bring fairness and recognition to the surface. A transparent framework that links policy to objectives—sustainability, education support, or entrepreneurial capital—reduces ad hoc concessions. Documented rules and review cadences build predictability while allowing for exceptional cases handled through defined processes.

Mini Case Study: Governance Tensions and Negotiation Leverage in a Family Office-Backed Growth Company²

Background

A Northern European growth company (“the Company”) had a fragmented ownership structure typical of family office–backed ventures. A family investment vehicle (“Family Office A”) held roughly one-third of the shares, alongside a strategic investment firm (“Investor B”), a large financial institution, and several smaller shareholders.

The Company’s CEO had close family ties to Family Office A, adding both trust and complexity to governance dynamics. Over several years, most shareholders supported injecting additional capital to accelerate expansion into new European markets. Investor B, however, favored a more conservative strategy focused on cost optimization rather than growth investment.

This strategic divergence led to prolonged board tensions lasting nearly three years, reflecting a common challenge in family-office ecosystems: balancing long-term entrepreneurial ambition with differing risk appetites among co-investors.

Negotiation Dynamics

In late 2025, Investor B approached a senior figure connected to Family Office A with an unsolicited offer to sell a significant minority stake at a premium valuation. The initial acceptance was considered on a private basis, outside a broader shareholder process.

Soon after, internal leadership within Family Office A raised governance concerns, arguing that the opportunity should be offered to all shareholders to ensure fairness and avoid potential conflicts of interest. This internal challenge prompted a reassessment of the transaction structure—highlighting how intra-family governance can be as decisive as external negotiation.

Negotiations intensified when Investor B threatened to seek the removal of the Company’s CEO and claimed to have shareholder backing. At the same time, Investor B signaled a willingness to divest a large portion of its holdings.

After a series of structured negotiations led by the next-generation leadership of Family Office A, a revised agreement emerged:

A substantial equity block was sold to Family Office A at a lower per-share price than initially proposed.

• The opportunity to participate was extended to all shareholders, though none elected to purchase.

• The transaction was completed shortly thereafter, consolidating Family Office A’s ownership position.

Aftermath and Strategic Implications

Following the transaction, Family Office A initiated a board restructuring to align governance with a renewed growth strategy. The CEO remained in place, and the Company began preparing for accelerated expansion.

Retrospectively, it appeared that Investor B may have faced liquidity pressures elsewhere in its portfolio, potentially influencing its willingness to sell at a discounted valuation. Recognizing and responding to counterparties’ broader financial constraints proved to be a decisive negotiating advantage.

Key Lessons for Family Offices

1. Governance discipline matters internally as much as externally.

2. Family dynamics and leadership structures can shape negotiation outcomes and reputational risk.

3. Strategic misalignment among co-investors can create both friction and opportunity.

4. Fair-process considerations—such as equal access to deal terms—are critical in multi-shareholder environments.

5. Understanding counterparties’ broader financial pressures can provide leverage but must be balanced with long-term relationship considerations.

6. Ownership consolidation often precedes governance reform and strategic repositioning.

Where to Build Skills

A growing ecosystem of executive education and professional programs supports leaders who want to embed structured negotiation and governance into their offices. Across Europe and the United States, compact certifications, executive formats and seminar‑style courses blend theory with case discussion, while professional associations focused on family enterprise complement these offerings with research, community, and practitioner standards.

Open Questions for Practice

1. How do different family offices structure negotiations for assets, governance, and generational transition, and what methodologies correlate with stable outcomes over five to ten years?

2. What behavioral and psychological routines—pre‑briefs, debriefs, red‑team reviews—most effectively reduce unproductive conflict?

3. Do offices with formal negotiation protocols outperform informal offices on execution and cohesion?

4. Which elements of methodology—process design, mediation, demand lists—travel best across cultural contexts?

5. What type of technology is used in the pre-, during- and post-negotiation process in the family office, and how does technology help or challenge the journey?

Conclusion

In family offices, negotiation is inseparable from leadership. It converts complexity into clarity, aligns diverse interests, and protects relationships that must last for decades and sometimes generations. By adopting structured principles—preparation, clear openings, process leadership, and deliberate closings—families can make decisions that are both compassionate and rigorous. The result is durable agreements that advance long‑term vision and governance maturity. As wealth meets strategy, negotiation excellence becomes a core element of stewardship. Families who invest in disciplined process design and behavioral insight are better equipped to navigate the inevitable tensions of generational wealth, turning friction into advantage rather than liability.

About the Authors

Karin Mugnaini is a Senior Advisor for the N-Conference and other strategic events at Schranner Consulting AG, a global organization specializing in difficult and complex negotiations. With offices in Zurich, New York City, Hong Kong, and Dubai, the Schranner Negotiation Institute advises business and government leaders in more than 40 countries. Its methodology, the Schranner Concept®, is used by numerous Fortune 500 companies. Prior to joining the Schranner Negotiation Institute and Schranner Consulting AG, Karin built a career in strategy and business development across North America, Asia, and Europe in publishing, licensing, entertainment, luxury, and executive education. At Schranner Consulting AG, she supports the development and delivery of high-level events focused on excellence in negotiation and leadership under pressure. Karin holds an MBA from Georgetown University and a BA in Political Science from Smith College and is fluent in five languages.

Marc J. Sharpe is a senior investment leader with more than twenty‑five years in family office, private equity, and venture capital. Known for strategic insight, governance expertise, and the ability to foster innovation and value creation, he has built and led investment platforms that deliver sustainable growth while navigating complex financial and operational challenges. Marc is the Founder and Chairman of The Family Office Association, a global peer network of single‑family offices that has become a trusted forum for collaboration, market insight, and proprietary deal flow. He also teaches an MBA class on ‘The Entrepreneurial Family Office’ as an Adjunct Professor at Rice University and Southern Methodist University. He holds an M.A. from Cambridge University, an M.Phil. from Oxford University, and an MBA from Harvard Business School. Contact: marc@tfoa.me

Disclosures

The Family Office Association (“TFOA”) is a peer network of single family offices. Our community provides educational information and a forum to exchange ideas of mutual interest. TFOA does not participate in the offer, sale, or distribution of any securities, nor does it provide investment advice. The material in this whitepaper is provided for informational purposes only and should not be construed as a recommendation to buy or sell any security or to retain the services of any investment adviser or other professional. Nothing herein constitutes legal, accounting, tax, or investment advice, and no information in this document should be relied upon as such. References to organizations, products, services, or individuals do not constitute or imply any warranty, endorsement, sponsorship, affiliation, or recommendation by TFOA. Any investment decisions you make based on information provided by TFOA or its contributors are your sole responsibility. All investments involve risk, including the possible loss of principal. Past performance is not indicative of future results. Families should consult their advisers and consider their unique circumstances before making any investment or governance decisions. The TFOA name, logo, and all related product and service names, designs, and slogans are trademarks or service marks of The Family Office Association. All other trademarks referenced herein are the property of their respective owners. All intellectual property rights of TFOA or its contributors remain their property and may be protected by applicable laws; no rights are transferred to you by virtue of this publication. Information presented in this whitepaper has been obtained from sources believed to be reliable; however, TFOA and the authors do not guarantee its accuracy or completeness. The material is prepared solely for general informational purposes and is not intended as user-specific advice.

Authored by Glenn Cameron, CFA, FMVA and edited by Marc J. Sharpe, M.A., M.Phil., MBA

Abstract

Family offices seek to preserve purchasing power, prudently grow capital, and reflect family values across generations. Traditional portfolios—heavy in equities, bonds, private markets, and real estate—face structural pressure from persistent inflation, high public debt and net‑interest burdens, rising cross‑asset correlations, and liquidity traps in illiquid alternatives. This whitepaper explores how a measured Bitcoin allocation can complement a family’s core portfolio by adding a programmable scarcity hedge, a low‑correlation return stream, and long‑term growth optionality. It also provides practical guidance on sizing, phasing, custody, governance, and liquidity planning to integrate Bitcoin in line with a conservative family‑office mandate.

Executive Summary

• The evolving macro environment has weakened traditional diversification: cash and bonds struggle against inflation and provide less diversification, while equities, credit, and real estate have become more correlated in times of stress.

• Bitcoin’s core attributes—finite supply, decentralization, and independence from fiat monetary policy—map to three family‑office objectives: preserve purchasing power, diversify real risks, and retain growth optionality.

• A modest 1–5% sleeve can improve portfolio resilience without dominating governance or liquidity. Historically, Bitcoin’s correlations to equities and bonds have been low, while long‑run CAGRs have been high (with significant volatility).

• Implementation should emphasize phased entry (i.e. dollar cost averaging), policy‑based rebalancing, institutional‑grade custody—preferably multi‑institution, multi‑signature—and a total‑return approach to generate cash when needed.

• Values alignment is also possible given credible narratives around financial inclusion, human‑rights resilience, and supporting the energy transition.

1) The family‑office mandate—and why the old toolkit is strained today

The family office mandate spans more than annual returns: protect real wealth, fund multi‑decade commitments, and transmit values and governance to the next generation. That mandate is harder in an era of persistent fiscal deficits, rising debt‑to‑GDP, and growing federal debt net‑interest costs that can pressure fiat purchasing power over time.

At the portfolio level, five structural weaknesses are increasingly visible:

1) inflation erosion benefits in cash and bonds.

2) liquidity traps in private equity and real estate.

3) higher stock–bond correlation that undermines 60/40 defenses.

4) elevated valuations in risk assets; and

5) intense competition for quality deals.

Traditional ‘diversification’ often adds instruments that share the same underlying risks.

2) Why Bitcoin? Three strategic roles

A) Preservation: a programmatic hedge against monetary debasement

Bitcoin’s monetary policy is fixed in decentralized code practically impossible to alter, supply is asymptotically capped at 21 million, and issuance is transparently reduced over time. This removes discretionary dilution risk. In a world where deficits are structural and balance‑sheet expansion is a recurring tool, exposure to an asset with rule‑based scarcity can help protect intergenerational purchasing power.

In practice, Bitcoin is probably best understood as a modern complement to gold and quality real assets. It is not a panacea: drawdowns can be severe, and short term price behavior is volatile. But over long horizons, its scarcity mechanism makes it a credible hedge against currency debasement—especially when sized prudently within a diversified portfolio.

Exhibit 1. Macro context: USA – Total Federal Outlays and Revenues

Source: CBO’s February 2024 report The Budget and Economic Outlook: 2024 to 2034.

Exhibit 2. Macro context: USA- Federal Debt Held by the Public as a % of GDP

Source: CBO’s February 2024 report The Budget and Economic Outlook: 2024 to 2034.

Exhibit 3. Bitcoin vs. 2Y inflation expectations (YoY)

Source: Onramp Bitcoin, Federal Reserve Bank of St Louis, Investing.com

B) Diversification: low correlation when it counts

Diversification works only if return drivers differ. Bitcoin’s return stream is largely orthogonal to earnings cycles and interest‑rate policy because it is driven by protocol rules, network adoption, and liquidity cycles unique to the asset. Over multi‑year windows, correlations with broad equities and aggregate bonds have tended to hover near zero. For families already fully exposed to equity beta, credit, and real assets, “different’ matters more than ‘more.”

A 1–5% sleeve typically suffices to introduce this independent risk/return profile. The goal is not to chase every rally but to insert a genuine diversifier that can buffer the portfolio during synchronized sell‑offs in traditional assets. Paired with rules‑based rebalancing, even a small sleeve can contribute meaningfully to long-term portfolio resilience.

Exhibit 4. Correlation Matrix — Bitcoin & Major Asset Classes – Jun 30, 2020 – Jun 30, 2025

Source: Data – Bloomberg; Calculations – Onramp Bitcoin

C) Growth optionality: asymmetric upside from a capped‑supply network

Families require growth to offset inflation and fund future obligations. Bitcoin’s long‑term return profile has been characterized by high compounding potential alongside high volatility. As adoption expands while supply remains capped, the asset exhibits asymmetric upside akin to owning a call option on a growing monetary network.

Capital efficiency is an additional benefit: to add a modest increment to expected real return, a small Bitcoin sleeve can substitute for much larger shifts in equities or bonds, preserving liquidity for other priorities. For many families, the asset also serves as a bridge to next‑gen engagement—digital‑native heirs intuitively understand its design and relevance.

Exhibit 5. CAGR vs. traditional assets and allocation required for +1% expected real return

3) Implementation without drama

Sizing and phasing

Target a 1–5% range of total assets, calibrated to spending needs and drawdown tolerance. Families with higher liquidity requirements or lower risk appetite should sit at the low end; others can scale by policy once governance and custody are battle‑tested. Phase entry using dollar‑cost averaging over several quarters to desensitize timing and build cultural comfort. Pair with a rebalancing band (e.g., ±100–200 bps) to harvest volatility mechanically.

Exhibit 6. Policy pathway: start at 1%, DCA to 3%, quarterly rebalancing bands, governance ‘gate’ for >5%

Liquidity: a total‑return playbook

Bitcoin does not pay a coupon. Treat it as a total‑return sleeve. Monetize a small, rules‑based portion of gains during favorable windows—for example, trim when the sleeve exceeds its upper band—to fund distributions, capital calls, or new commitments. This converts appreciation into liquidity without dismantling the core exposure. Keep a written policy to avoid ad‑hoc decisions during volatility spikes.

Resilient Custody

Institutional‑grade custody is non‑negotiable. The emerging best practice is multi‑institution, multi‑signature custody (MIC). Keys are split across qualified custodians and/or trustees in distinct jurisdictions; transactions require 2‑of‑3 or 3‑of‑5 approvals; and insurance coverage is in place. MIC reduces single points of failure, strengthens legal resilience, and enforces dual‑control.

Decide up front:

• Movement thresholds (e.g., board approval above defined amounts).

• Jurisdiction strategy (custodians across complementary regulatory regimes).

• Whitelisting and address‑control procedures for outbound transfers.

Exhibit 7. Example of Multi Institution Custody Scenario

Policy, compliance, and documentation

Add a Bitcoin mandate to the Investment Policy Statement (IPS): purpose (hedge/diversifier/growth), target range and phasing, rebalancing rules, liquidity plan, custody standards, valuation/pricing source, reporting cadence, and escalation criteria. Maintain live tax and regulatory checklists; rules evolve. Schedule quarterly reviews and an annual deep dive.

Sample IPS insertion (illustrative)

Purpose and role: Bitcoin is included as a strategic diversifier and potential hedge against monetary debasement, with long‑term growth optionality. Target allocation: 3% of total assets, with an allowed range of 2–5%. Phasing: Dollar‑cost average over at least four quarters to initial target. Rebalancing: Maintain within ±150 bps of target; trims above the upper band fund distributions or new commitments. Custody: Assets held with qualified custodians in a multi‑signature, multi‑institution structure, with insurance coverage. Compliance: All activity subject to legal and tax review; pricing from an approved source; quarterly reporting to the Investment Committee. Review: Annual deep dive and quarterly check‑ins; any move beyond 5% requires explicit IC approval.

4) Values and legacy: making the impact case credible

Many families integrate philanthropy and values into their investment approach. With careful framing, Bitcoin can reinforce—rather than conflict with—key priorities:

• Financial inclusion: borderless access to savings and payments where banking is fragile; lower‑cost remittances in certain corridors.

• Human rights: resilience to censorship and seizures under authoritarian regimes; ability to support at‑risk communities when traditional rails are restricted.

• Energy transition: miners as flexible buyers of last resort for intermittent renewables; potential methane‑mitigation when collocated with flared‑gas sites.

Back the narrative with data and governance: disclose custody standards, report on energy‑use metrics where appropriate, and align philanthropic initiatives with measurable outcomes. Include next gen family members in oversight roles to strengthen continuity and engagement.

5) Key risks and practical mitigations

• Price volatility: mitigate via small sizing, DCA entry, and rules‑based rebalancing bands.

• Operational/custody risk: mitigate via MIC, segregation of duties, whitelists, and audited processes.

• Liquidity risk: plan liquidity with a total‑return playbook; avoid forced selling during stress.

• Reputational risk: align narrative with values; communicate policy and safeguards clearly to stakeholders.

6) Mini‑checklist for the IC pack

• Mandate: Target band (e.g., 1–3%); escalation criteria to 5%.

• Phasing: DCA schedule by quarter; volatility gates; pause conditions.

• Rebalancing: banded policy with trims to fund distributions; avoid discretionary chasing.

• Custody: MIC with 2‑of‑3; jurisdiction diversification; insurance requirements.

• Operations: dual‑control workflows; address whitelists; cold‑storage standards; audit trail.

• Compliance/Tax: counsel and CPA review; disclosures; board minutes and approvals.

• Education: standing agenda item; next-gen participation

7) Methodology notes (for the investment committee)

Inflation expectations: When comparing Bitcoin behavior with inflation regimes, use survey‑based expectations and market‑based measures (e.g., breakeven inflation). Regime identification should avoid look‑ahead bias and should be robust to alternative windows (12–36 months).

Real‑return framing: When evaluating contribution to expected real return, anchor to a long‑term inflation assumption (e.g., 2%). Illustrations that compare allocations needed to add +1% real return should clarify that all results are sensitive to the horizon, regime definition, and the choice of proxies for each asset class.

Risk measurement: For drawdown analysis, use peak‑to‑trough declines on closing prices and report both depth and duration. For family‑office governance, emphasize scenario‑based stress (e.g., policy shock, liquidity crunch, sharp tightening) rather than relying solely on variance.

Back testing hygiene: Use transparent data sources, specify windows, and put confidence bands around point estimates. Where possible, show robustness checks (e.g., multiple start dates for DCA, alternative rebalance bands).

8) FAQs for principals and trustees

Short answers you can use in Investment Committee packs and trustee briefings:

• “Isn’t Bitcoin too volatile?” — The sleeve is intentionally small (1–5%) and phased in. Volatility at the sleeve level can be an asset when rebalancing is systematic, because it realizes gains without relying on market timing.

• “Why not just buy a crypto fund or ETF?” — Pooled vehicles can be appropriate, but direct ownership plus institutional custody (or a separately managed account with qualified custodians) gives greater control over counterparties, geography, and security policies.

• “What about taxes?” — Tax treatment varies by jurisdiction. Maintain a transaction log and pricing source and obtain tax advice before implementing rebalancing or income‑generation overlays.

• “Can we earn yield on Bitcoin?” —A conservative family office can treat Bitcoin as a total‑return asset and generate liquidity via policy‑based trims instead.

Conclusion

In an era of fiscal imbalances and correlated traditional assets, Bitcoin has a role as a strategic complement for family offices aiming to preserve purchasing power, diversify risks, and capture growth optionality. Its fixed supply, decentralized governance, and independence from fiat policies position it as a hedge against monetary debasement, with historical correlations to equities and bonds near zero over multi-year periods¹. A modest 1-5% allocation can enhance portfolio resilience—historically delivering high compound annual growth rates (CAGRs) while allowing systematic rebalancing to harvest volatility—without overwhelming liquidity or governance. Implementation requires dollar-cost averaging (DCA) for phased entry, multi-institution, multi-signature custody to mitigate operational risks, and integration into the Investment Policy Statement (IPS) with clear rebalancing bands and liquidity plans. Key risks like price volatility and custody failures are addressable through small sizing, rules-based processes, and audited controls. Overall, a prudent Bitcoin sleeve aligns with intergenerational mandates, offering asymmetric upside in a capped-supply network amid structural macro pressures, provided families consult advisers for tailored execution.

About The Authors

Glenn Cameron is Global Head of Onramp Institutional and Chief Investment Officer of Acropolis Treasury, where he works with family offices, institutions and corporate treasuries on Bitcoin strategy, governance and portfolio integration. He has more than two decades of experience in multi asset portfolio management and investment consulting across the US, UK, Europe, the Middle East and Africa. Prior to joining Onramp, Glenn was Senior Investment Consultant & Head of Digital Assets at Cartwright, where he led the advice behind the first British pension scheme allocation to Bitcoin, and before that he was a Portfolio Manager & Head of Asset Allocation at Sanlam Investments, managing multi asset and alternative investment portfolios. He has held earlier leadership roles in investment consulting and derivatives trading and holds the CFA and FMVA designations. Contact: glenn@onrampbitcoin.com

Onramp Institutional is the institutional advisory and solutions arm of Onramp, focused exclusively on Bitcoin for fiduciaries. The team works with boards, CIOs, treasurers and risk committees to build a defensible process around Bitcoin: executive and committee briefings, portfolio and liquidity modelling, wrapper and custody design (including multi institution custody vaults), and governance and audit documentation. Onramp operates alongside clients’ existing legal, tax and consulting relationships to help them evaluate, size and structure modest Bitcoin sleeves that are auditable, compliant and operationally robust for family offices and other long term allocators: www.onrampbitcoin.com

Marc J. Sharpe is a global investment executive and board member with a distinguished career spanning family office management, private equity, venture capital, and investment banking. Known for his strategic insight, deep expertise in family office governance, and ability to foster innovation and value creation, Mr. Sharpe has built and led investment platforms that deliver sustainable growth while navigating complex financial and operational challenges. His leadership style emphasizes integrity, continuous improvement, and long-term partnerships that generate significant stakeholder value. Mr. Sharpe is the Founder and Chairman of The Family Office Association, a premier global peer network of single-family offices. Since 2007, he has cultivated a community of senior family office executives and principals representing some of the world’s wealthiest families, promoting education, shared-best practices, and co-investment opportunities. Under his leadership, TFOA has become a trusted forum for collaboration, market insight, and proprietary investment deal flow on a global scale. He also teaches an MBA class on “The Entrepreneurial Family Office” as an Adjunct Professor at Rice University and Southern Methodist University. Mr. Sharpe holds an M.A. from Cambridge University, an M.Phil. from Oxford University, and an MBA from Harvard Business School. Contact: marc@tfoa.me

The Family Office Association (“TFOA”) is a global peer network that serves as the world’s leading single family office community. Our group is for education, networking, selective co-investment, and a resource for single family offices to share ideas, deal flow and best practices. Members are not actively marketing products or services to other members, and no contact information or email lists will ever be shared. Since our founding in 2007, TFOA has led the global single family office community by delivering world-class educational content, unique networking opportunities, and exceptional thought leadership to our highly curated network of the world’s largest and wealthiest families: www.tfoa.info

Disclosures

This material is for educational purposes only and is not investment, legal, accounting, or tax advice. It does not constitute an offer to buy or sell any security or digital asset, or a solicitation to engage in any investment strategy. Past performance is not indicative of future results. All investments involve risk, including possible loss of principal. Families should consult their advisers and consider their unique circumstances before making any investment decisions.

Authored by Marc J. Sharpe, M.A., M.Phil., MBA

Abstract

This whitepaper examines the growing trend of direct investing by family offices, particularly through partnerships with independent sponsors. As family offices seek to bypass the fee drag and limited control of traditional private equity funds, direct investing is increasingly being seen as a compelling alternative. We explore the mechanics of independent sponsor transactions, the pros and cons for family offices, some global trends, and key legal and governance considerations. Hopefully, by better understanding these dynamics, family offices will be able to make informed decisions to adjust their investment strategies and achieve their goals.

Introduction

The private equity landscape is seeing increasing involvement by family offices in direct investing. Several recent reports highlight this trend. For example, the North America Family Office Report (2024) by Campden Wealth and RBC suggests that 60% of family offices are involved in direct private equity investments, with many planning to increase their allocations. A recent survey by Bastiat Partners and Kharis Capital suggests half of family offices plan to undertake direct deals in the next two years. And, according to the Dentons Family Office Direct Investing Survey (2022), 63% of family offices engage in direct investments, with many others expressing interest in this approach. Lastly, a Citi Private Bank 2021 survey found that 76% of family offices had at least 10% of their portfolios in direct – signaling “a shift away from conventional methods” of commingled funds¹.

Traditionally, family offices have relied on commingled funds, with blind-pool capital, managed by general partners, who charge annual management fees plus a carried interest – typically a 2% management fee, and 20% carried interest (“2 and 20”). However, dissatisfaction with these fees, for mediocre performing managers, coupled with a desire for greater control and alignment with investment objectives, has led many family offices to explore direct investing.

Direct investing allows family offices to invest directly in private companies, often in collaboration with independent sponsors — typically experienced dealmakers who source and structure transactions without a pre-existing fund. This model usually provides family offices with the opportunity to participate in investments on more favorable terms, with enhanced control over decision-making processes and the potential for higher returns.

This whitepaper aims to provide a comprehensive overview of direct investing through independent sponsors, highlighting its advantages, operational mechanics, and strategic considerations for family offices.

Evolution of Private Equity Models

The history of private equity can be traced to 1901, when J.P. Morgan—the man, not the institution—purchased Carnegie Steel Co. from Andrew Carnegie and Henry Phipps for $480 million. More recently, the private equity blind pool model pioneered by KKR, among others, in the mid-1970s has dominated the industry. In this model, limited partners (LPs) commit capital to blind-pool funds managed by general partners (GPs), who charge a management fee (typically 2% of committed capital) and carried interest (usually 20% of profits), typically above a preferred return hurdle. This structure provided LPs with access to private markets but came with limitations, including significant fees, a lack of control over investment decisions, and potential misalignment of interests. Family offices are increasingly turning to direct investing due to their growing scale and expertise, a preference for greater oversight and privacy in their investments, and frustrations with the traditional fund model’s lack of alignment. Conventional private equity funds often prioritize quick exits or fundraising objectives that conflict with the long-term goals of family capital. Through direct investments, whether independently or in collaboration with others, families can choose their target companies and actively manage their involvement. The rise of direct investing reflects a broader trend towards professionalization within the family office space, with private equity remaining a favored asset class (PwC, 2024).

Thus, motivated by the desire to reduce fees, gain more control, and invest in sectors aligned with their expertise, many family offices are choosing to invest directly in private companies. This shift is facilitated by the emergence of independent sponsors, who offer a flexible, deal-by-deal approach to private equity investing.

Independent Sponsors: Definition and Operation

Independent sponsors, also known as ‘fund-less sponsors’, are individuals or small teams with extensive experience in private equity or investment banking. Unlike traditional GPs, they do not manage a dedicated fund; instead, they identify investment opportunities, negotiate deals, and then raise capital from investors on a per-deal basis. The process typically involves the following steps:

1. Deal Sourcing: Independent sponsors leverage their networks and industry knowledge to identify potential acquisition targets.
2. Due Diligence and Negotiation: Upon identifying a target, the sponsor conducts preliminary due diligence and negotiates a Letter of Intent (LOI) with the seller.
3. Capital Raising: After signing the LOI, the sponsor has a specified period to raise the necessary capital from investors, such as family offices, to complete the transaction.
4. Closing and Management: If capital is successfully raised, the deal closes, and the sponsor, along with the investors, takes ownership of the company. The sponsor often plays an active role in overseeing the investment, such as serving on the board, while the company’s management team handles day-to-day operations.

The independent sponsor does not typically take an executive role in the acquired company – unlike a search fund entrepreneur – but rather oversees the investment as a board member. The company’s existing management is typically retained and often augmented with new talent to help grow the business.

Compensation for independent sponsors is structured to align their interests with those of the capital providers. Common components include:

• Monitoring Fees: Typically, 3% to 5% of the company’s EBITDA, paid quarterly, to compensate the sponsor for ongoing management and oversight. This contrasts with traditional private equity funds, where management fees are charged to the fund regardless of portfolio company performance.
• Carried Interest: A share of the equity gains, ranging from 10% to 30%, often tiered based on performance thresholds. This ensures that the sponsor benefits only after investors achieve a certain return.

This performance-based compensation model contrasts with the traditional “2 and 20” structure of private equity funds, where fees are charged on committed capital regardless of deployment. The independent sponsor model ties fees directly to the success of each deal, fostering a strong alignment with investors. Consider a simplified example: An independent sponsor sources a $50M enterprise value deal funded with $25M equity and $25M debt. A family office provides 100% of the equity, and the sponsor earns a 2% closing fee ($1.0M), rolling half into the deal. The independent sponsor also receives a $250K annual monitoring fee. After 5 years, the company sells for $100M. The family office receives its original $25M back, an 8% compound, preferred return (~$11.7M), and 80% of the remaining profits ($30.6M). The sponsor earns approximately $7.7M in carried interest, bringing their total to around $9.5M across fees and carry. A significant majority of the sponsor’s upside is closely tied to the deal’s performance—aligning interests closely with investor.²

According to McGuireWoods, the majority of independent sponsor deals take place in the lower middle market, with approximately three-quarters of transactions involving companies valued up to $75 million. Notably, over two-thirds of these deals involve firms with enterprise values below $50 million, a segment often bypassed by larger private equity players. These smaller enterprises, typically family- or founder-led with EBITDA under $10 million, pose unique challenges in due diligence and operations that major funds tend to sidestep. Independent sponsors who tackle the demanding tasks of identifying and enhancing these businesses can achieve substantial returns in a market segment that traditional private equity has largely ignored.

Evidence suggests that independent sponsors are increasingly involved in larger transactions. Holland & Knight reports that a growing number of these sponsors are handling middle-market deals, with company valuations typically between $100 million and $500 million. This trend highlights the growing sophistication of the independent sponsor framework and heightened trust from funding sources. For example, Global Endowment Management secured more than $450 million to finance independent sponsor-led deals, signaling robust institutional support for these larger-scale investments.³

This trend is further supported by the increasing number of independent sponsors in the USA, estimated at around 1,300, many of whom are leveraging their deal-by-deal track records to transition into traditional fund structures. The Wall Street Journal notes that Coalesce Capital secured $900M for its first fund and Agellus Capital raised $400M after securing an anchor investor early in the process. As independent sponsors continue to demonstrate their ability to source and close larger transactions, the model is steadily moving into the mainstream of middle market private equity.⁴

Potential Benefits for Family Offices

Independent sponsor transactions are commonly financed through networks comprising family offices, high-net-worth individuals, and dedicated investment funds. Current data indicates that family offices represent the primary source of capital for these deals.⁵

Direct investing through independent sponsors offers several key benefits to family offices:

• Cost Efficiency: By avoiding the management fees and carried interest of traditional funds, family offices can retain more of the investment returns. This is particularly appealing given the high perceived costs associated with the traditional model, although these costs, while not borne directly, do still come out of the return to the investor.
• Control and Flexibility: Family offices have more influence over investment decisions, including the selection of sectors, holding periods, and exit strategies. This allows them to align investments with their expertise and long-term goals.
• Alignment of Interests: The partnership model ensures that the sponsor’s incentives are closely aligned with those of the family office, as both parties share in the success of the investment. Where the alignment is strongest is the management fee charged to the portfolio company based on performance rather than charged to LPs based on commitments.
• Access to Niche Opportunities: Independent sponsors often focus on specific industries or deal sizes, providing family offices with access to unique investment opportunities that may not be available through traditional funds.

These benefits make direct investing an attractive option for family offices seeking to optimize their private equity portfolios. However, despite these advantages, direct investing is challenging for family offices, especially smaller ones. Doing direct deals requires capabilities in deal sourcing, due diligence, execution, and asset management that many family offices lack or are unwilling to build. Many family offices operate lean (a CIO and a few analysts) and cannot easily vet deals across various industries on tight timelines.

Global Trends in Direct Investing

The adoption of direct investing by family offices is a global phenomenon, with variations across different regions:⁶

Region	# of SFO’s	Key Trends
North America	3,180	83% engage in private equity, often through direct deals (Deloitte, 2024).
Europe	2,020	Cultural preference for direct ownership, leading to co-investments.
Asia-Pacific	2,290	Rapid growth, favoring growth equity and venture deals with local sponsors.
Middle East	290	Diversification from oil-based economies through direct investments.

• North America: As the largest market for family offices, North America leads in direct investing, with significant assets under management (AUM) and a strong preference for private equity (Deloitte, 2024).
• Europe: European family offices, driven by a cultural inclination towards direct ownership, increasingly participate in co-investments and partnerships with independent sponsors.
• Asia-Pacific: The region is experiencing rapid growth in family offices, particularly in China, Hong Kong, and Singapore, where there is a focus on growth equity and venture deals, often in collaboration with local sponsors or conglomerates.
• Middle East: Emerging wealth hubs like Dubai and Abu Dhabi are attracting family offices seeking to diversify through direct investments in various sectors.

These regional differences highlight the adaptability of the direct investing model to diverse market conditions and investment preferences.

Governance and Operational Considerations

Engaging in direct investing requires family offices to navigate complex legal, governance, and operational landscapes. Unlike a commingled fund where an LP is hands-off, here the family office and sponsor effectively become business partners in a single-company investment. Key considerations include:

• Partnership Agreements: Clear agreements with independent sponsors regarding fees, interest, governance rights, and operational roles are essential to ensure alignment and prevent conflicts.
• Due Diligence: Family offices must conduct thorough due diligence on both the investment opportunity and the independent sponsor’s track record, expertise, and reputation.
• Regulatory Compliance: Compliance with regional regulations, such as securities laws and tax implications, is crucial to avoid legal pitfalls.
• Risk Management: Direct investments entail higher risks due to concentrated exposure; robust risk management frameworks are necessary to monitor and mitigate potential downsides.

Securing an appropriate partner presents significant challenges. Independent sponsors frequently find it difficult to establish connections with family offices, which often maintain a discreet presence and avoid prominent networking gatherings. Connections are typically facilitated through trusted intermediaries such as private bankers, lawyers, or investment advisors familiar with a family’s investment preferences. Family offices, when considering partnerships with independent sponsors, often express concerns about: the sponsor’s dedication (fearing a lack of commitment during challenging times), additional funding requirements (where reluctance to provide further capital can lead to conflicting priorities), and governance issues (with families typically seeking significant influence, such as board representation or veto powers, when providing the majority of capital).

Economic Comparison

Comparing the economics of traditional funds and direct investing models reveals significant differences:

Aspect	Traditional PE Funds	Direct Investing with Independent Sponsors
Fees7	2% management + 20% carry	Negotiated per deal, typically lower
Control	Limited for LPs	High, with influence over decisions
Flexibility	Fixed fund terms, forced exits	Flexible holding periods and exit strategies
Tax Alignment	Potential for phantom income	Tailored structures for better tax outcomes

Direct investing allows family offices to tailor tax structures and focus on single-asset exposure, enhancing after-tax returns. However, it’s worth noting that the lines are not black-and-white. Some large family offices continue to invest in top-tier PE funds for diversification, while also carving out a portion for directs. And some independent sponsors effectively operate like small funds (doing multiple deals in parallel and even raising “search funds” or pledges to cover their costs). Conversely, some PE funds now offer separately managed accounts or coinvest funds to single investors, blurring into the direct model.

Challenges and Risk Mitigation

While direct investing offers numerous advantages, it also presents challenges that family offices must navigate:

• Finding the Right Partner: Identifying and vetting independent sponsors with appropriate expertise and track record is crucial.
• Building Trust: Establishing trust with sponsors under tight deal timelines can be difficult; thorough due diligence and clear communication are essential.
• Resource Intensity: Direct investing requires significant time and resources for deal sourcing, due diligence, and ongoing management, which may strain smaller family offices.
• Concentration Risk: Investing directly in single assets increases concentration risk compared to diversified fund investments.

To mitigate these risks, family offices can:

• Develop In-House Expertise: Build a team with the necessary skills or partner with experienced advisors.
• Establish Clear Criteria: Define investment criteria and partner selection processes to ensure alignment with strategic goals.
• Diversify Investments: Spread investments across multiple deals and sectors to manage risk.
• Implement Robust Governance: Set up strong governance structures to monitor investments and sponsor performance.

Implications for Stakeholders

The rise of direct investing impacts various stakeholders in the private equity ecosystem:

• Limited Partners (LPs): Traditional LPs may need to build in-house capabilities for direct investing or seek better terms from GPs.
• General Partners (GPs): GPs face increased competition from independent sponsors and may need to adjust their fee structures or offer more co-investment opportunities.
• Deal Intermediaries: Investment bankers and advisors benefit from an expanded buyer pool but must adapt to the unique requirements of family offices and independent sponsors.
• Founders and Management Teams: They gain access to flexible, long-term capital from investors who are often more aligned with their strategic vision. While they may be forced to accept longer sale processes and exclusivity periods, and take some risk of failure of financing, the benefit is a wider pool of buyers and most importantly the ability to align better when they are rolling equity (which is typical at this stage).

Conclusion

Direct investing through partnerships with independent sponsors represents a paradigm shift in how family offices approach private equity. By offering greater control, cost efficiency, and alignment of interests, this model enables family offices to optimize their investment strategies and achieve superior outcomes. At the same time, the line between independent sponsors and traditional GPs is being blurred by the emergence of hybrid structures and flexible capital strategies. Many first-time fund managers are simultaneously raising debut funds while deploying capital through co-investment pools, SPVs, pledge funds, or even permanent capital vehicles. These models blend the flexibility and performance orientation of deal-by-deal investing with the scalability of fund platforms. For investors, they may offer a dual benefit of more efficient, performance-tied fee structures and better tax alignment by linking recognition to actual distributions. As a result, the rigid GP/LP paradigm is giving way to a broader spectrum of capital deployment models—ranging from blind pools to single-asset partnerships—with family offices often leading the charge in adopting and shaping these innovations. In conclusion, while challenges exist, careful planning and execution can help family offices navigate the complexities and reap the rewards of direct investing. As the number of family offices continues to grow globally, those that embrace direct investing should be well-positioned to achieve their financial objectives and preserve wealth for future generations.

 

About the Author

Marc J. Sharpe is a global investment executive and board member with a distinguished career spanning family office management, private equity, venture capital, and investment banking. Known for his strategic insight, deep expertise in family office governance, and ability to foster innovation and value creation, Mr. Sharpe has built and led investment platforms that deliver sustainable growth while navigating complex financial and operational challenges. His leadership style emphasizes integrity, continuous improvement, and long-term partnerships that generate significant stakeholder value. Mr. Sharpe is the Founder and Chairman of The Family Office Association, a premier global peer network of single-family offices. Since 2007, he has cultivated a community of senior family office executives and principals representing some of the world’s wealthiest families, promoting education, shared-best practices, and co-investment opportunities. Under his leadership, TFOA has become a trusted forum for collaboration, market insight, and proprietary investment deal flow on a global scale. He also teaches an MBA class on “The Entrepreneurial Family Office” as an Adjunct Professor at Rice University and Southern Methodist University. Mr. Sharpe holds an M.A. from Cambridge University, an M.Phil. from Oxford University, and an MBA from Harvard Business School. Contact: marc@tfoa.me

About TFOA

The Family Office Association (“TFOA”) is a global peer network that serves as the world’s leading single family office community. Our group is for education, networking, selective co-investment, and a resource for single family offices to share ideas, deal flow and best practices. Members are not actively marketing products or services to other members and no contact information or email lists will ever be shared. Since our founding in 2007, TFOA has led the global single family office community by delivering world-class educational content, unique networking opportunities, and exceptional thought leadership to our highly curated network of the world’s largest and wealthiest families: www.tfoa.info

 

Appendix A

To calculate the preferred return and related financial outcomes for the given private equity deal example, let’s break it down step by step based on the provided information below.

Key Details:

• Enterprise Value (EV): $50 million
• Equity Contribution: $25 million (provided by the family office)
• Debt: $25 million
• Closing Fee: 2% of $50 million = $1.0 million (sponsor rolls half, $0.5 million, into the deal)
• Monitoring Fee: $250,000 per year
• Holding Period: 5 years
• Exit Value: $100 million
• Preferred return: 8% per year, compounding annually
• Profit split: Family office receives 80% of remaining profits, sponsor receives 20% as carried interest

Step-by-Step Calculations:

#1. Preferred Return Calculation:

The preferred return is an 8% annual return, compounded annually, on the family office’s $25 million equity investment over 5 years using the formula: A = P * (1 + r) ⁿ – P

• P = 25,000,000 (initial equity investment)
• r = 0.08 (annual preferred return rate)
• n = 5 (years)
• Calculate (1.08)^5 = ~1.469328
• Total amount including principal: 25,000,000 * 1.469328 = 36,733,200
• Preferred return: 36,733,200 – 25,000,000 = 11,733,200

#2. Total Return to Family Office (Capital + Preferred Return):

Family office receives its initial $25 million equity back plus the preferred return: 25,000,000 + 11,733,200 = 36,733,200

#3. Exit Proceeds and Remaining Profits:

• Exit Value: $100 million
• Debt Repayment: $25 million
• Equity Value at Exit: $100 million – $25 million = $75 million
• Remaining Profits after family office receives capital + preferred return: 75,000,000 – 36,733,200 = 38,266,800

#4. Profit Split:

• Family Office (80%): 38,266,800 * 0.8 = 30,613,440
• Sponsor Carried Interest (20%): 38,266,800 * 0.2 = 7,653,360

#5. Sponsor’s Total Compensation:

• Closing Fee: $1.0 million (half rolled into the deal, so cash received = $0.5 million)
• Monitoring Fees: $250,000/year × 5 years = $1.25 million
• Carried Interest: ~$7.65 million
• Total Sponsor Compensation: 0.5 + 1.25 + 7.65 = 9.45

#6. Family Office Total Return:

• Capital Returned: $25 million
• Preferred Return: ~$11.73 million
• Profit Share: ~$30.61 million
• Total: 25 + 11.73 + 30.61 = 67.34

 

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Disclosures

The Family Office Association (“TFOA”) is a peer network of single family offices. Our community is intended to provide members with educational information and a forum in which to exchange information of mutual interest. TFOA does not participate in the offer, sale or distribution of any securities nor does it provide investment advice. Further, TFOA does not provide tax, legal or financial advice. Materials distributed by TFOA are provided for informational purposes only and shall not be construed to be a recommendation to buy or sell securities or a recommendation to retain the services of any investment adviser or other professional adviser. The identification or listing of products, services, links, or other information does not constitute or imply any warranty, endorsement, guaranty, sponsorship, affiliation, or recommendation by TFOA. Any investment decisions you may make based on any information provided by TFOA is your sole responsibility. The TFOA logo and all related product and service names, designs, and slogans are the trademarks or service marks of The Family Office Association. All other product and service marks on materials provided by TFOA are the trademarks of their respective owners. All of the intellectual property rights of TFOA or its contributors remain the property of TFOA or such contributor, as the case may be, such rights may be protected by United States and international laws and none of such rights are transferred to you as a result of such material appearing on the TFOA web site. The information presented by TFOA has been obtained by TFOA from sources it believes are reliable. However, TFOA does not guarantee the accuracy or completeness of any such information. All such information has been prepared and provided solely for general informational purposes and is not intended as user specific advice.