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Why Asia multi-family offices are ripe for consolidation

Why Asia multi-family offices are ripe for consolidation

After private banks, multi-family offices are likely to see consolidation in Asia, according to an industry expert.

‘There is a strong growth in the multi-family office (MFO) space but the smaller ones are likely to struggle, especially if they don’t offer the entire spectrum of capabilities, while the bigger ones will get stronger,’ Shirley Chua, CEO and MD of Golden Equator Capital, a Singapore headquartered independent asset management and private equity investment firm, told Citywire Asia.

‘It makes sense the smaller ones will consolidate into bigger groups, so that they can share elements such as infrastructure and clients.’

According to Chua, who used to be a director at Citibank Singapore, MFOs have grown in strength since the global financial crisis of 2008-09.

‘People are more cautious after the global crisis of 2008-09, especially in the way they engage with banking institutions.

‘Ultra-high net worth clients are looking to diversify out of different banking products, but now are also looking for a one-stop shop where all their financial requirements can be managed through one entity.’

New idea for Asian clients

However, the idea still remains new to Asia, she adds. MFOs are more established in the US and in Switzerland.

'I think the biggest challenge in Asia is the lack of understanding among Asian clients about the concept of MFOs.

‘Clients still don’t fully understand what a family office is, how it functions, and why they need to consider these entities,’ says Chua.

It’s not just clients, many market participants struggle to understand how family offices operate, she adds.

'I think if various financial service providers – banks, insurance companies, etc –as well as regulators understand how to deal with MFOs, it can be to the collective benefit of our clients as well as to the development of Singapore as a leading wealth management centre.’

Eventually, wealth could flow from Asia to Australia or to London if that doesn’t happen, she added.

Another challenge for multi-family offices is understanding the new breed of wealth creators emerging from China. ‘In the recent past, much of the billionaire wealth has been created in China so MFOs need to understand how to conduct business with Chinese clients.’

Clients turning cautious

Currently, given volatile markets, clients remain cautious about investing, she said, adding that as a result of the volatility, some new asset classes/segments are seeing a rise in popularity.

‘We see a growing trend of investors devoting a bigger share of their portfolios to technology and to private equity. In the past, these assets used to account for about 5% of portfolios, but now, that proportion has increased,’ she said.

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