How HK family offices are mitigating risks amid market uncertainties
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Family offices in Hong Kong are proactively diversifying their portfolios and embracing long-term megatrends to withstand market turbulence — from global real estate and gold, to emerging opportunities in artificial intelligence and healthcare.
“I can say there are no safe haven assets as such right now,” said Donny Lam, chairman of DL Family Office, a Hong Kong-based multifamily office serving mostly Greater China families.
“I said to my clients: As long as there’s not a real hot war between the two giants, I think we are okay,” Lam said during AsianInvestor’s 13th Family Office Briefing Hong Kong on Tuesday.
The family office manages discretionary mandates for global multi-asset investments. Lam stressed it is vital to keep the portfolios diversified to mitigate potential risks in the market.
“We try to be diversified as much as possible,” he said.
Traditionally, families in Greater China were heavily exposed to real estate markets in mainland China or Hong Kong, either through the family business or their investment portfolios. As the Chinese property market started encountering trouble, they began diversifying their investments into other assets.
Some who are still new to portfolio diversification are using real assets to mitigate risks. These include physical gold, and farmland investments in overseas markets, such as North America, Lam said.
On the other hand, for families who are no strangers to diversification, there have been more and more requests to look at Japan’s real estate market, from families in mainland China, Hong Kong, as well as Taiwan, he said.
“Property [in other markets or sectors] is a way of diversification. But of course, for generic financial assets, this [finding a safe haven] is very difficult."
PROPERTY BET
Echoing Lam’s remarks, Charlie Bigard-Ong, co-founder and managing partner of Hong Kong-based single family office Augventive Limited, noted that real estate is a major component of its investment portfolio.
“We still believe that real estate across the world makes sense [to generate decent risk-adjusted returns in the long-term]. We are looking at opportunities in Thailand and Hong Kong,” Bigard-Ong told the same panel.
“We believe that there are clearly opportunities when people have deleveraged their portfolios. So, you have assets that are available at much better entry prices,” she said.
The family office manages the wealth of an entrepreneur from Southeast Asia. Its portfolio is skewed toward alternative assets.
Right now, it is also looking at commodities such as gold, to adapt its portfolio to market volatilities.
STICKING TO THE GUIDELINES
On portfolio diversification, Bigard-Ong said the main challenge is to identify where the opportunity is, and whether the family is interested in it.
When a family member's investment interest does not align with prevailing market conditions, or when generational disagreements arise, adhering strictly to predetermined investment guidelines is crucial to navigating such situations, she stressed.
“Investment guidelines do help you to have parameters, whether the market is volatile or not,” she said. “At the end of the day, you can’t predict volatility and how high it is going to be. So, as long as you know what the targets and objectives are…whatever happens within that framework, you can manage.”
Among all the risks investors are facing these days, Stephen Pau, chief investment officer of Hong Kong-based multifamily office Hefeng Family Office, named the uncertainty of the rate cut in the US as the top, followed by the direction of yen.
If the yen strengthens and reverses the trend of the carry trade, Pau said he would be closely watching the market reaction.
Hefeng Family Office manages global multi-asset portfolios for Chinese families.
Meanwhile, consequences of political elections happening globally are another major risk, Pau said. He stressed that no matter what uncertainties are in the market, there are megatrends that are still going to do well regardless.
These include artificial intelligence and healthcare, which he believed would do well in the long term. “We have to identify the trend and stick with it,” Pau said.
He believed the Chinese market will pick up in the medium to long term. If the US starts to cut rates, there will be more room for China to add liquidity to the market, he noted.
“There will be some light in the tunnel,” he said.