It was an invitation too good to resist.
Matthew McCarthy was asked by KKR & Co. to fly to New York from Ohio, where he manages money for the founders of a consumer-products company. First he had dinner with KKR’s billionaire co-founder Henry Kravis. The next morning, he met David Petraeus, the former director of the Central Intelligence Agency and current chairman of the KKR Global Institute at the company’s headquarters.
“They didn’t really pitch products,” said McCarthy, 43, whose firm Rockside Capital Partners intentionally stays under the radar. “They brought out General Petraeus.”
McCarthy is the type of investor that KKR and its private equity competitors including Blackstone Group LP and Carlyle Group LP are increasingly courting. Family offices and their advisers manage an estimated $4 trillion, including for the newly rich in Silicon Valley and China, Midwestern entrepreneurs and old money in Europe.
The money managers are responding by adding staff, holding conferences and offering sweeteners, including reduced fees on investments.
Efforts are paying off. Blackstone, which last year started reaching out directly to family offices and hosting forums for them, has $43 billion of its $310 billion under management from private wealth, more than triple the amount five years ago. Across private equity, family offices account for about 6 percent of capital, up from 4 percent in 2010, according to research firm Preqin.
Industry executives say the percentage should be higher.
“The private wealth side is such an under-tapped segment, and way under-invested in alternatives,” said Brendan Boyle, Blackstone’s senior managing director of private wealth management.
Record Profits
The firms are seeking new pools of wealth to lessen their reliance on state and corporate pension plans. They’re also reaching out at an opportune time. Globally private equity firms reaped a record $428 billion by selling holdings last year, a 30 percent increase from 2013, according to Preqin.