VC funds comprise 18% of overall private investments

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Private market investments remain the alternative investment of choice with allocations to startups and VC funds comprising 18% of the overall pie for family offices and high-net-worth individuals in 2021, says a report.

According to the Private Market Monitor, the changing face of the startup ecosystem with the spate of initial public offerings and acquisitions has created a new category of first generation high-net-worth individuals (UHNIs) that are proactively exploring the family office route to manage their wealth.

The Private Market Monitor is a survey of over 100 family offices and UHNIs launched by trica in partnership with AZB & Partners and EY.

As per the report, there is a growing importance of startup investments. “Private market investments remain the alternative investment of choice with allocations to startups and VC (venture capital) funds comprising 18 per cent of the overall pie,” it said.

This is quite aggressive when compared to a 15% allocation to other alternatives (real estate, infrastructure, art, etc.), 20% allocated to fixed income and 36% to listed equities.

Moreover, over 83% family offices have an allocation to private markets which is over 10 per cent of their overall asset distribution; and this number has been steadily increasing over the past five years for 50 per cent of the respondents and has doubled for 40% of the participants.

The top factors investors evaluated to make direct startup investments were quality of top management, high growth market opportunity and the presence of a strong business moat.

Around 50% of family offices surveyed preferred the seed to Series A stage to enter a startup investment, 40% preferred late to pre-IPO transactions while 25% stated a preference for having a well distributed portfolio across stages.

Fintech (82%) and enterprise tech (71%) were the top two sectors of choice by a clear majority, followed by other sectors such as consumer tech (68%), healthcare (50%), agritech (35%), edtech (42%).

“The rapid expansion of UHNIs and family offices in India coupled with the positive exit scenario for startup investments in the last year has led to a growing appetite among investors to more actively manage their private market portfolios,” Nimesh Kampani, Co-founder and CEO of trica said.

trica is a LetsVenture company that creates software products for equity management and transactions. LetsVenture, founded in 2013, is a platform for startup investments with more than 7000 angel investors, a portfolio value of over $3 billion and an Angel AIF (alternative investment fund) with an asset under management of over $64 million.