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Family offices see improved investment

Family offices see improved investment

Asia Pacific family offices recorded second strongest performance at 6.7% in 2016 compared to other regions, and portfolios favoured private equity and equities, a new research by UBS and Campden Wealth Research has found.

According to The Global Family Office Report 2017, after a year of poor performance in 2015, family offices' average investment portfolio bounced back from 0.3% to 7% in 2016, and on average managed $445 million.

This included slightly higher proportions of private equity, as well as direct venture capital and private equity, co-investing and private equity funds, which account for 20.9% collectively, compared to the average of the global family offices 20.3%. Both Hong Kong and Singapore family offices have lower private equity allocation at 13.7% and 19.3% respectively.

‘In 2017, given current valuations, they are currently focused on risk management, evaluating private equity and credit opportunities as against just public market opportunities whilst diversifying away from their home region,’ said UBS’ Asia Pacific head of global family office, Anurag Mahesh.

‘In terms of sectors, Asia Pacific family offices are looking at healthcare, education and consumer technology enabled sectors primarily in the US and Asia, China in particular,’ he said.

The growth-oriented focus of the family offices in Asia Pacific naturally prompts them to invest in asset classes that promise higher returns, added Campden Wealth’s Dominic Samuelson.

‘Unsurprisingly, equities and opportunities within private equity, either in a direct capacity or through funds, attract their attention, both of which delivered above satisfactory performance in 2016,’ the company chief executive said.

When looking across the different types of private equity assets, the report found that funds based investing had a strong year. It accounted for 37.9% of all private equity investments – a 7.7% increase from 2016 among multi-year participants.

Moreover, succession planning is a key priority in Asia Pacific with 48.4% developing succession plans at the moment. When it comes to the driving factors contributing to the preparation of a succession plan, Hong Kong family offices attributed it to ‘Generational transition' and 'Aging family members'.

‘The next generations of Asian families have a much greater level of involvement in the family office compared to other regions, said Edith Ang, executive director, family advisory group, Asia Pacific, UBS.

‘They are involved through participating in projects, sitting on the board, assuming management or executive roles in the family office, or participating in philanthropic activities,’ she added.

Furthermore, environment, social, and governance (ESG) investments have also become increasingly important to the next generation of wealth holders. Over 40% of family offices in Asia Pacific are expecting to increase their allocations towards impact and ESG investments.

The most popular sectors to invest in are education, environmental conservation and energy resource efficiency. In Asia Pacific, 26.7% said that they are involved in impact investing.

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