Family office. Permanent capital in the Mittelstand.
A family office with operational ambition needs an investment discipline that harmonises with generational horizons. This pillar page organises our articles on the logic of permanent capital, the construction of a Mittelstand portfolio and the question of why trust is the actual balance-sheet position.
Why family offices and classical funds are becoming incompatible
The majority of mid-sized family offices in DACH have built up allocations to closed-end private-equity funds over the past decade. Under those market conditions, where returns came from multiple expansion and leverage arbitrage, that was a defensible decision. Those conditions no longer obtain in 2026. The average holding period in European mid-cap funds has extended beyond six years. Exit markets are selective. Fund-of-fund structures generate fee stacks whose gross-net spread has become substantial.
From the perspective of a family office with permanent-capital character this means: the allocation to closed-end funds was an adaptation to a market cycle, not a structural decision. The structural decision would be to build the participation portfolio in a way that the holding period is not constrained by a fund's life. That decision changes target selection logic, valuation basis and governance.
The mechanics of a Mittelstand allocation
A Mittelstand portfolio with permanent-capital character is not a mid-cap fund with a longer life. It is a different asset class with its own mechanics. Selection logic privileges cash-flow stability over EBITDA growth. Valuation orients toward substance and free cash flow after capex, not a multiple on normalised EBITDA. Governance is exercised through advisory and supervisory board structures, not through investment committees with portfolio-optimisation mandates.
The legal packaging of such an allocation is not trivial in DACH. A direct holding via a holding GmbH is the simplest form but creates tax and corporate-law complexity at larger volumes. The Luxembourg SCSp or the Swiss KmAG offer alternative paths but must be substance-capable in their structuring. The German unitary foundation under §80 BGB (new), in the 2023 reform, opens additional options for multi-generational structures with active participation activity. Which structure is the right one does not depend on marketing arguments but on family size, fiscal home and desired governance.
What permanent capital delivers for a family office
Three functions. First. Co-investment as equals. A family office that does not maintain its own acquisition platform can hold mid-cap participations via a permanent-capital vehicle without bearing the personnel and compliance burden of its own platform. The precondition is that the vehicle operator does not itself work in closed-fund logic. Second. Generational compatibility. The participation can be held across multiple foundation or inheritance generations without being driven by a liquidation that triggers accounting tax burdens or substance breaks. Third. Reputation cover. A family entrepreneur selling a life's work wants to know to whom. The question "Who stands behind your capital" is not a courtesy in the Mittelstand. It is the second axis of negotiation alongside price.
The operational interface
Family offices that co-invest with us or place mandates find at Tactical Management a structure that differs from a mid-cap fund on two points. First. We provide reporting in a level of detail that family-owned advisory boards can pass through as owner reporting, not in the summary form of a quarterly LP report. Second. We accept holding periods defined by the business, not by a fund's life. Marcus Köhnlein leads the operational supervision of the portfolio holdings. Dr. Tillmann Lauk coordinates the legal structuring of the co-investment vehicles. Dr. Raphael Nagel conducts negotiations with owner families.
The thesis. A family office that wants to remain in the Mittelstand must adapt the participation structure to the holding period of the business, and permanent capital is the only capital structure that allows this adaptation without continuous refinancing friction.
Articles in this cluster
Member articles are currently available in German only.
Family-office portfolio construction
How a Mittelstand portfolio is structured to carry across three generations. On allocation discipline, co-investments and governance.
Family-office infrastructure investments
Regulated infrastructure as a substance position in a family-office portfolio. On WACC logic, concession contracts and political risk.
Evergreen fund · Structure
Which legal packaging of an evergreen vehicle is functional in DACH and where the boundaries between open, semi-liquid and permanent-capital structures lie.
Mittelstand as an asset class
Why the German Mittelstand is not a sub-category of European mid-cap PE but a distinct asset class with its own valuation logic.
Permanent capital in the Mittelstand
Classical PE funds operate with five- to seven-year holding periods. The German Mittelstand thinks in generations. On the structural incompatibility.
Invisible capital · Trust and reputation
The reputation capital of an acquirer is, in the Mittelstand, the second axis of negotiation alongside price. On the half-life of trust and its effect in auctions.
Related pillar pages
Pillar page curated by Dr. Raphael Nagel, founding partner. Tactical Management operates from Munich, Vienna and Baar (Zug).