Asia-Pac family offices outperform global average

Singapore

FAMILY offices in the Asia Pacific achieved the strongest performance among their global peers with a 16.4 per cent portfolio return for 2017, driven by equities and private equity.

The global average family office return, according to the latest edition of the Global Family Office Report, was 15.5 per cent. The report was published by UBS and Campden Wealth.

The report surveyed principals and executives from 311 family offices, with average assets under management (AUM) of US$808 million. For the APAC region, 53 family offices participated, with average AUM of US$400 million.

The global average return is the highest in the last five years. It is more than double the 7 per cent average return in 2016, and a "complete revival" from the 0.3 per cent average return in 2015.

Among APAC family offices, allocations to equities at 28 per cent is in line with the global average. But APAC offices had a relatively higher allocation to developing market equities at 14 per cent, compared to the global average of 6 per cent.

Real estate was the second highest allocation among APAC offices at 18 per cent, followed by private equity at 15 per cent.

Returns from private equity jumped from 13 to 18 per cent over the year. The average allocation into PE currently stands at 22 per cent, 3.8 percentage higher than in 2017.

2017 marked a global record for PE fund raising, with over US$750 billion raised, according to McKinsey.

Anurag Mahesh, UBS Global Wealth Management head of global family office group (APAC), said: "For the first time since we have been analysing this data, Asia has led the way on performance, benefiting from a relatively high exposure to developing market equities, and the high number of private equity deals in the region.

"This is reflective of what we're seeing in our APAC family offices as well, since they are increasingly interested in PE deals. Some of the sectors they are interested in include technology, healthcare and education."

In APAC, as many as 75 per cent of family offices expect to undergo a generational transfer of wealth within 15 years. Close to seven in 10 family offices either have a succession plan in place (39 per cent), or are in the process of developing a plan (32 per cent).

Globally, for those that already have a plan in place, 24 per cent have a written plan and 10 per cent have verbal agreement on their succession strategy.

Mr Mahesh said: "As most of the Asian wealth is first generation, there is a higher expectation in this region that the next generation will take control of the family office. They participate by joining the board, assuming management or executive roles, undertake different projects for the family office, or are involved in philanthropic activities."

Yet another major trend is the accelerating interest in impact investing. Almost a third (32 per cent) of family offices are now involved in impact investing, an increase of 4.2 percentage points over the year.

About 39 per cent of respondents expect this to increase once the next generation takes control of their families' wealth. In APAC, 35 per cent of family offices reported involvement in impact investing.

Patrick Quek, UBS country team head, Singapore ultra high net worth and global family office (Southeast Asia), said: "In Asia Pacific, we have witnessed a growing interest among our millennial and female clients in sustainable and impact investments . . . Often they would align their investments with their family values and performance criteria. Private equity and equity are the most common vehicles for impact investments."