Asia Pacific to attract global family offices

Family offices across the globe, particularly in North America, are looking to increase investments in Asia Pacific, according to a report released on Wednesday (November 17).

More than half (54%) of the 385 family offices surveyed said they plan to increase investments in Asia Pacific, according to the Apac edition of The Global Family Office Report by Raffles Family Office and Campden Wealth. Of the family offices surveyed, 48% of North American family offices said they plan to do so, as did 77% of the Asia Pacific firms.

The survey covered single and private family offices – with private family offices defined as those with a maximum of eight families, and with 50% of funds belonging to just one family.

In comparison, 45% of respondents plan to increase investments in North America, and 34% in Europe. Only 13% are looking to allocate further into emerging markets.

“Europe is regarded as providing jurisdictional certainty, which is great and not something to be underestimated… But it's not where they go to invest their money for the growth of their portfolio. Asia's numbers are pretty compelling,” Nick Hayward, director of Asia Pacific at Campden Wealth, said during a press briefing to launch the report.

He added that in conversations with clients and other industry insiders, “there is a huge amount of interest in Asia all the time,” particularly in the US.

LOOKING EAST

China in particular has gained significant attention from the family offices, wrote the report. Currently 45% of respondents already have investments in China with a further 14% planning to enter the market.

The respondents expressed a preference for investing in China through funds rather than directly.

“We don’t understand it, it’s too complicated for us, too risky. However, we like the macroeconomic climate, so we have one co-investment in a data centre. This is a one-off,” a single-family office co-founder in Singapore was quoted saying in the report.

“We co-invested with one of our real estate funds and it is ticking several boxes. We would never have done that alone,” the investor added.

The survey did not extensively cover the family offices' views on risks but respondents were evenly split on the impact of the US-China trade war with 51% agreeing that the trade war had affected their investments.

On managing regulatory risks in light of recent government crackdowns, Chi-man Kwan, group chief executive and co-founder of Raffles Family Office, said that it “flows back to the argument that family offices plan for generations. One of the key things they concentrate on is a diversified portfolio and asset allocation”.

“There is always something in the news… Family offices plan in very long-term in terms of asset allocation; they generally don't respond very much to the short term. That is something that is very, very different from various other financial institutions,” he said.

PRIVATE EQUITY

Asia Pacific family investors are also gravitating towards private equity with 80% of family offices stating that are currently invested in the asset class, with over 90% planning to increase or maintain that level.

The investors also preferred direct investments over fund-based investments.

Active management of direct investments brought an average of 25% returns to investors, while passive management gave 14% returns. Private equity funds had a 14% return while funds of funds had 9%.

Family offices in the region also allocated more to special purpose acquisition companies (Spacs) – 2% compared with 0.5% globally – and 31% in Apac planning to increase allocation to Spacs compared with the 12% global average.

APAC EXPANSION

The region is also emerging as a prime destination for family offices from Europe and North America looking to open a second or third arm.

“If you look at the statistics, most of them state that they probably will open their second office in their own continent or country, but the third one, generally they are always looking Asia,” Kwan said.

“Asia is where they are looking for investment return in terms of alpha,” he said, adding that Asia, particularly Hong Kong was a good place for alpha generation.

“Pre-Covid, they had people flying into Hong Kong or Singapore every other month, and all they need is a place and a local team to support them when is needed. And then at the same time, they want to have a local resident to take care of the local, logistical issues, for example, setting up a local company and investment firms,” he said about the demand for family office services in the region.

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