Asian single family offices get in on private market deals at later stage than European counterparts: Credit Suisse
Kelly Ng
SINGLE family offices (SFOs) in the Asia-Pacific tend to participate in private equity at a later stage, while their European counterparts, which have access to a more mature private market, are more likely to be involved in early stage funding.
According to a Credit Suisse survey published on Monday (Sep 26), 55 per cent of SFOs in the Asia-Pacific tend to get involved at the pre-initial public offering (IPO) stage, while 74 per cent of those in Europe, Middle East, and Africa (EMEA) participate in early stage A and B series investments.
Larger SFOs with over US$500 million in assets under management are also more likely to be involved in secondary or later-stage transactions.
Overall, 68 per cent of the 116 SFOs polled participate in Series A and B funding, while the top 3 sectors are technology (notably, fintech and biotechnology), IT, and property.
The SFOs surveyed manage a total of US$90 billion to US$100 billion in assets and, on average, employ 10 people to support 7 family members across 2 generations.
On average, each SFO participated in 7 private deals over the past 24 months. 13 per cent of those surveyed said they do not invest in private markets at all.
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In terms of sourcing for deals, 78 per cent of SFOs in the Asia-Pacific tap personal connections, compared to 66 per cent in EMEA. SFOs in the Asia-Pacific are also more likely to use private banks (45 per cent, compared to 25 per cent in EMEA) and private equity funds.
Again, the maturity of the European market, where there are simply more channels for private investing, probably plays a role in these differences, the authors of the survey report wrote.
In general, the quality of the founder drives the SFOs’ private deal selection criteria, with 72 per cent ranking this among their top 3 criteria when investing privately.
Other key criteria include the company’s financial profile (38 per cent) and how well the interests of the SFO align with the prospective investment (29 per cent).
Regional differences also play out when it comes to who makes investment decisions for the SFO. In Asia, about 6 in 10 (or 61 per cent) said investment decisions are made by selected family members. This proportion stands at 39 per cent among SFOs in EMEA.
In contrast, half of the SFOs in EMEA use investment committees, compared to only 17 per cent of those in Asia.
60 per cent of SFOs with more than US$500 million in assets under management, compared with just 22 per cent among the smaller SFOs.
On Monday, Credit Suisse also launched an SFO index that builds on a universe of 300 SFOs in 3 tiers: Small SFOs have less than US$100 million of assets under management, medium SFOs have between US$100 million and US$500 million of assets under management, while large SFOs have over US$500 million of assets under management.
As at Jul 31, the average asset allocation, on assets in banks’ custody, in its SFO Index stands at 47 per cent in equities, 29 per cent in bonds, and 17 per cent in alternative investments, with the rest in multi-asset investment solutions.
As a result of their higher equity allocations, large SFOs have underperformed small and medium SFOs in the year ending Jul 31, Credit Suisse said.
On average, SFOs in the index have seen a loss of around 7.6 per cent on their beneficial owners’ assets in custody at banks.
Regionally, SFOs in Asia have outperformed those in Europe and the Middle East. Credit Suisse’s head of global economics and research Nannette Hechler-Fayd’herbe said this was likely because SFOs in the region are predominantly small and tend to have less equity exposure.
Asian SFOs were down 6.6 per cent as at end-July, European SFOs were down 8.1 per cent, while SFOs in the Middle East were down 11.8 per cent.
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