Due to the potentially high returns, family offices have preferred investing in private equity funds. In 2017, the average family office portfolio infused US$51 million into private equities (1). The second largest investment fund was public equities. The amount of money put into private equities is expected to continue to rise in 2019. This expectation stems from the fact that family offices’ private equity investments performed extraordinarily well in 2017.
Notably, of all the available sectors, the most popular industry for family offices’ private equity fund investment is healthcare. The second most popular area is technology, the third is real estate. Family offices are unquestionably showing an increasing interest in investing in the healthcare sector. Historically, investing in the life sciences, pharmaceutical and medical device industries has been considered quite risky for a couple of reasons.
1. It requires specialized knowledge and high-level expertise to determine the viability of any given investment opportunity in this sector.
2. There is inherent volatility associated with the life sciences sector, which discourages investors from putting their money in this area.
The need for specialized knowledge and the perception of volatility keep most family offices away from investing in the life sciences and healthcare sectors. Even though only a small number of family offices venture into healthcare investing, the trend is growing steadily for a variety of reasons:
Often, the idea of healthcare investing arises for personal reasons. For example, the loss of a family member to a disease, such as cancer, heart disease, Alzheimer’s frequently provides the rationale for the investment choice.
BUILDING A LEGACY
Ultra-high net worth families often seek the opportunity to build a legacy. Investing in novel therapeutic solutions offers the chance to do just that. Some family offices are willing to make such investments, in spite of the perceived risks.
Family office healthcare investing is somewhat similar to philanthropy. Generally, any gains made from healthcare-related investments will be channeled back into research.
Often, consultants with specialized knowledge in healthcare investing approach family offices and educate them on the opportunity that the sector represents.
The investment portfolio of Masqana will consist of a mix between late-stage growth investments and early-stage innovations that address the most urgent public health challenges currently impacting the United States – with potential global application. Masqana will also advance existing medical developments from a national basis across the globe into new regions.
As an investment fund that can take on investments with relatively long development cycle, Masqana seeks a significant equity position. Products that have application in both, developing and industrialized nations are preferred for greater reach.
Masqana employs a range of investment structures including debt, equity and royalty-based financing. Each Masqana project must advance the Fund’s social impact objectives and demonstrate the ability to achieve commercial success.