Wealthy families are embracing their inner Warren Buffett, albeit on a smaller scale. They used to hand most of their assets to managers to invest. Now, following the likes of Buffett, Michael Dell and Bill Gates, many are acting like private equity firms, buying large stakes in companies or acquiring them outright. Families can exert tighter control over their money, give the kids something to do and cut their deal fees.

But the trend has meant that private equity shops have been forced to scramble to make sure they don't lose a critical source of money for their buyout funds.


"After a decade of direct investing we found that we actually saved millions, which were reinvested in companies and assets -- huge, huge savings," said Chad Hagan, whose family built its wealth in private health-care and financial businesses... Almost 70 percent of family offices engage in direct investing, according to an April survey of 80 offices by the Family Office Exchange. And in 2015 they outperformed buyout firms. Direct deals returned them 15 percent on average, the survey showed -- more than double private equity results that year.

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