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Family offices take on higher risk profile
FAMILY offices are shifting towards higher risk less liquid assets, in contrast to their traditional profile of more conservative assets, said Sara Ferrari, UBS global wealth management head of global family office group.
Global family offices' allocation to private equity (PE) in particular may be up to 50 per cent, she said.
In Asia, the preferred way to invest in PE is by private investment rather than a fund, she said. "Families don't like to pay management and performance fees. Going direct avoids layers of fees ... There is also the ability to choose sectors rather than investing in a blind pool. Some families specialise in areas aligned to their industry such as healthcare." Families also like the opportunity to co-invest with large institutions or other families.
UBS yesterday hosted the Asian edition of the UBS Family Office Summit in Singapore. It was attended by over 120 of the wealthiest global family offices and executives in the region. The participants in aggregate manage over US$200 billion in assets.
Anurag Mahesh, UBS head of global family office group Asia-Pacific, said the rate of formation of family offices is reflected in the rate of growth of the billionaire population. A 2016 report by UBS and PwC found that a billionaire is produced in Asia every three weeks, outpacing all other regions.
"Wealth grows at twice the rate of GDP and the billionaire growth rate is even faster. In terms of formation of billionaires, the Asian rate is phenomenal. The next phase is the professionalisation of wealth ... The generational transfer of wealth will be massive." Mr Mahesh estimates that there are 40-50 family offices in Singapore, and roughly around 300 in Asia.
In a statement, UBS head of wealth management Asia-Pacific Edmund Koh said the bank expects significant wealth transfer of US$2.1 trillion in the next 20 years. "With the rise of Asia-Pacific, we will be witnessing one of the largest wealth transfers as 45 per cent of wealth will be transferred in the next five years, and around 70 per cent in the next 10 years."
Ms Ferrari said there is interest among Asian families in the feasibility of a family office structure to help in succession planning. "(Wealth transfer) is a massive change which can be disruptive if not handled properly. We do get a lot of requests and work with families to set up a family office ... There is interest in Asia to set up a proper institutionalised structure."