Between the desire to regain control of their investments and the need to maintain a structured framework, new models are emerging, on the borderline between traditional funds and direct investment.
In this interview, the Capital Croissance team takes a look at these developments and how hybrid approaches, such as K2 Collective, are attempting to provide a concrete response to investors' expectations.
Do you think that family offices' expectations have changed radically in their approach to private equity?
Yes, there has been a clear evolution in the way family offices approach private equity.Historically, many invested directly, relying on their entrepreneurial network and proximity to management. The funds then brought essential elements: diversification, professionalization of processes and access to broader opportunities.
Today, we're seeing a new approach to private equity. Many families want to regain more control over their investments: they want to choose the deals they invest in more precisely, gain a deeper understanding of the companies they invest in, and have greater control over the pace at which they invest.
At the same time, they do not necessarily wish to forego the advantages of a structured framework: investment discipline, in-depth analysis of projects, clear governance and collective risk management.
This dual aspiration - greater freedom of choice without losing the rigor of a fund - explains the growing interest in hybrid approaches, which seek to reconcile investor autonomy with institutional structuring.
Why are hybrid models between closed-end funds and deal-by-deal investments so difficult to structure over the long term?
Hybrid models seek to reconcile two investment logics based on quite different dynamics.
A closed-end fund operates according to a collective discipline: a defined investment horizon, centralized decision-making and progressive portfolio construction over time. This structure provides visibility and enables portfolio-wide risk management.
In contrast, deal-by-deal investing relies on the individual choice of each investor. Each family can decide whether or not to participate in an opportunity, depending on its convictions, liquidity or asset strategy.
The challenge is to avoid two pitfalls. On the one hand, an overly rigid structure that simply recreates a classic fund. On the other, an overly opportunistic organization, sometimes lacking in due diligence and transparency, where the absence of collective commitment can make it difficult to build a coherent portfolio.
To work over the long term, these models need to strike a subtle balance between collective discipline, alignment of interests and individual freedom, which presupposes a particularly clear legal architecture and governance.
Another approach is to subscribe to co-investments offered by closed-end funds. This practice has developed considerably in recent years, to the point of becoming a strategy in its own right for some investors. In particular, it enables them to gain overexposure to a transaction at often more attractive economic conditions. In practice, however, access to these opportunities is generally conditional on primary exposure in the fund behind the transaction. Alignment between the parties is not always perfect and, above all, making an informed direct investment decision requires significant resources in terms of time and expertise. There is as yet little statistical evidence of the real impact of co-investment on the overall performance of the investors who use it.
How does the K2 Collective architecture (Core Fund and family co-investment) redefine alignment between investors?
K2 Collective's architecture has been designed precisely to meet the need for balance between a collective framework and freedom of investment, the fruit of discussions with Capital Croissance investor families since the platform's inception.
K2 Collective embodies a different approach to that of conventional funds. These sometimes rigidify the deployment of capital, limiting agility and favoring more mimetic investment dynamics. Conversely, K2 Collective's family capital base enables us to approach transactions with greater flexibility, whether in terms of investment horizon, governance or deal structuring, particularly in equity and flex equity.
The program places family investors at the heart of the investment dynamic. Families have access to the team's entire deal flow, and can choose to increase their exposure to certain operations according to their convictions and wealth strategy.
To ensure long-term success, the model is based on two complementary pillars: a collective foundation ensuring continuity, diversification and investment discipline, and mechanisms enabling direct participation in certain opportunities.
The difference with conventional co-investment is significant. The aim is not to complete a round of financing on an ad hoc basis, but to organize investors' involvement in transactions from the outset. In this way, families participate in transactions selected as part of the overall strategy.
This arrangement creates a particularly clear alignment: all share exposure to the common portfolio and a long-term rationale, while retaining the possibility of expressing their convictions on certain transactions. The aim is to combine the rigor and continuity of a fund with the flexibility and commitment of direct investment.
Where does value creation really lie in direct investment: entry discipline, governance or operational support?
Value creation in direct investment is generally not based on a single factor, but on a combination of several dimensions.
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Entry discipline is obviously a determining factor. Choosing the right company, at the right time, with the right operating structure, conditions a large part of future results. Quality of sourcing and analytical skills play a central role here.
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But structuring instruments to manage the downside risk and capture the upside, as well as governance, also become key levers, particularly in SMEs and mid-sized companies. The investor is not just a provider of capital: he is often involved in structuring decisions, strategic thinking and the implementation of management tools.
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Finally, operational support can accelerate certain transformations: financial structuring, international development, external growth or team-building. This is particularly true in the small and lower mid-market segment in which we are positioned: these are often the companies where strategic and operational support create the most value.
In practice, performance often comes from the ability to combine these three dimensions: entry, management and long-term support.
For a family already active in private equity, what concrete benefits does a structured program like K2 bring in terms of portfolio construction and pace control?
For a family already active in private equity, the issue is generally no longer access to opportunities, but how to structure its portfolio over time. Investing directly can offer great opportunities, but sometimes leads to portfolios built opportunistically, with irregular rhythms and limited diversification.
A structured program like K2 provides a framework. The Core Fund makes it possible to gradually build a coherent, diversified portfolio, with continuity of investment. At the same time, co-investment mechanisms make it possible to increase exposure to certain operations according to convictions.
For many family offices with tightly-knit teams, this approach also broadens their capacity for action. By relying on K2, they benefit from an extended team capable of identifying and structuring more opportunities.
Program transparency and proximity to families are also key. Some families take part in investment meetings, sometimes over several generations, while the team benefits in return from their experience and networks.
In practical terms, K2 Collective combines the discipline of portfolio construction with regular access to opportunities and freedom of choice, while offering greater visibility over the pace of investment and management of committed capital. In this way, K2 Collective creates a genuine space for exchange between investors, team and management, where collective intelligence becomes a lever for value creation.
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