Direct Investment
Direct investment is when an allocator invests directly into a company or asset rather than through a fund.
Allocator relevance: Increases control and fee efficiency but requires deeper underwriting, governance readiness, and operational capability.
Expanded Definition
Direct investments can include private companies, real estate, private credit deals, or structured transactions. Compared to fund investing, direct investing shifts responsibility for sourcing, diligence, monitoring, and exit planning to the allocator. It can produce better economics but requires talent and process.
For family offices, direct investing is common but highly variable in sophistication and governance maturity.
How It Works in Practice
Allocators source opportunities (often through networks), run diligence, negotiate terms, and manage ongoing monitoring. Some direct programs use external advisors; others operate with internal teams and IC processes similar to institutional funds.
Decision Authority and Governance
Direct programs require clear decision authority, documented underwriting standards, and risk limits to avoid opportunistic drift. Governance also matters for conflict management and post-investment oversight.
Common Misconceptions
- Direct investing is always cheaper and therefore better.
- Direct investing guarantees control.
- Fund investing is “lazy” compared to direct.
Key Takeaways
- Better economics come with higher execution burden.
- Governance and underwriting discipline are gating factors.
- Direct investing should fit mandate and team capability.