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APAC Family Offices 2017: Performance returns back to health in 2016

Zürich Media Releases APAC

Global Family Office Report 2017: the world’s leading family office research study offers insight into performance, investments and structural issues.

Key findings:

  • Investment performance returned back to health as family offices embrace risk and invest for the long term, accepting illiquidity.
  • APAC family offices recorded second strongest performance at 6.7% in 2016 compared to other regions; portfolios favour private equity and equities. 
  • Hong Kong family offices achieved 5.9% return in 2016; higher allocation in real estate investments compared to peers. 
  • Succession planning is a key priority in Asia Pacific with 48.4% developing succession plans at the moment. 
  • Growth in impact investing expected with 26.7% of family offices in Asia Pacific currently involved.

Hong Kong, 12 September 2017 – Campden Wealth Research, in partnership with UBS, has launched its annual report on family offices from across the world with Asia Pacific insights today. The Global Family Office Report 2017, the most comprehensive analysis of its kind, surveyed principals and executives in 262 family offices with an average size of USD 921 million assets under management.

42 family offices participated from Asia Pacific this year, with nine family offices based in Hong Kong and 11 in Singapore. 101 family offices of the 262 are multi-year participants, who participated in the study in both 2016 and 2017.

Key findings:

APAC family offices recorded second strongest performance at 6.7%, driven by equities and private equity

After a year of poor performance in 2015, family offices' average investment portfolio bounced back with a notable increase from 0.3% to 7% in 2016. North America family office produced the strongest performance at 7.7% and Asia Pacific family offices at 6.7%. The overall positive performance was driven by encouraging results within developed-market equities and the ongoing strength of private equity in 2016. Both asset classes represent a substantial share of investments held by family offices across the globe. Within Asia Pacific, Hong Kong family offices' performance was at 5.9% in 2016.

Figure 1: 2016 Estimated benchmark performance of global composite portfolio, by region

Investment performance

2017 report
(2016 return)

2016 report
(2015 return)

Global

7%

0.3%

North America

7.7%

0.3%

APAC

6.7%

0%

HK

5.9%

0.8%

APAC family offices allocations favour equities and private equity

On average, Asia Pacific family offices manage USD 445 million with slightly higher proportions of private equity (including 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.

Despite a weaker performance in 2016, real estate direct investments are generally high in Asia Pacific family offices at 20.3%, with Hong Kong having an even higher allocation at 26%. At the same time, investments in REITS are also higher in Hong Kong at 2.2% compared to the global average of 0.8%.

When asked about their future intentions for asset allocations, most of the participating family offices are planning to maintain their current allocations to both equities (developed-markets) (60.6%) and equities (developing-markets) (48.6%). Private equity allocations are likely to grow further as 40.2 % and 49.3 % intend to allocate more into private equity funds and co-investments respectively.

Anurag Mahesh, Head of Global Family Office, APAC, UBS Wealth Management, said:

"In 2016, Asia Pacific family offices dialed up risk allocations which resulted in higher equity allocations and a notable improved performance over the prior year. 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. In terms of sectors, Asia Pacific family offices are looking at healthcare, education and consumer/tech enabled sectors primarily in the US and Asia, China in particular."

Dominic Samuelson, CEO at Campden Wealth commented on the findings:

"The growth-oriented focus of the family offices in Asia Pacific naturally prompts them to invest in asset classes that promise higher returns. 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."

Figure 2: Investment strategies by region

2017

Preservation

Balanced

Growth

Europe

23.3

53.5

23.3

North America

14

36.8

49.1

Asia-Pacific

25

34.4

40.6

Emerging Markets

31.3

50

18.8

Enrico Mattoli, Head of Global Family Office, Greater China, UBS Wealth Management, commented:

"Family offices in China are characterised by younger entrepreneurs or the so-called “new wealth”, who are more likely to be oriented towards growth than preservation. We expect to see the pattern of asset allocation favouring equities, private equities and real estate in the Greater China portfolios as they continue to provide attractive long term returns."

Almost half of Asia Pacific family offices are developing succession plans

Last year, family offices' number one ranked priority was to create a succession plan, as 69% expected to undergo a generational transition within the next 15 years. This year, nearly half (47.3%) of family offices claim to have some form of plan in place, while 29.6% are still developing their plans.

Family offices in Asia Pacific somewhat lag behind other regions when it comes to succession planning, as currently only 13.0% have written plans in place and 19.4% have no plan at all.

Yet, we expect this to change in the near future as 48.4% are developing succession plans at the moment. In particular, 67% of family offices in Singapore are in the process of developing a succession plan, while 29% of Hong Kong family offices are doing so.

When it comes to the driving factors contributing to the preparation of a succession plan, Hong Kong family offices attribute it to "Generational transition' and 'Aging family members'.

Edith Ang, Executive Director, Family Advisory Group, Asia Pacific, UBS Wealth Management:

"We view it as a positive trend that family offices in Asia Pacific are currently in process of developing their succession plans. In line with this, we also see a greater emphasis on the grooming, training and development of next generations to take over the family business compared to other regions. The next generations of Asian families have a much greater level of involvement in the family office compared to other regions. 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. These are practical strategies to build working experience in the family office, and it prepares the next generation for their roles in the future and helps ensure a successful transition."  

Sustainable and impact investing set for significant growth  

Sustainable and impact / environment, social and governance (ESG) investments have become increasingly important to the next generation of wealth holders. As a result, over 40% of family offices are expecting to increase their allocations towards impact and ESG investments. This reinforces a finding in last year’s report that families with children born after 1980 will see an increase in requests to participate in impact investing. Of the family offices that are already active in this area, 62.5% engage via private investment and 56.3% through private equity. 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. 

The average family office that manages a family’s philanthropic activities directly gave 5.7 million dollars over the past 12 months. Nearly 95% of family offices plan to maintain or increase their philanthropic commitments in the coming year. In terms of specific causes, environmental protection and poverty received notably more attention, climbing from 33.3% to 41.7% and 34.7% to 41.7% respectively between 2016 and 2017.

Anurag Mahesh commented:

"We see younger family members in Asia Pacific bringing in new values focused largely on social and environmental impact. Being active in impact investing is an opportunity for family offices to shape its purpose on top of reaping financial returns as well as to help create cohesion within families."

Notes to Editors

About family offices: A family office is, in its simplest form, the private office for a family of significant wealth. The number of staff working in the office can vary from one or two employees, to 100 or more staff, depending on the type and number of services it provides.

The purpose of an office can range from handling key family assets and core holdings (tax and accountancy, property and estate management) to include more sophisticated wealth management structures, while often providing family members with educational, professional and lifestyle services.

Generally, family offices manage key areas of family assets, including real estate holdings and direct or indirect investments, tax consolidation and estate management, serving as the central hub for a family’s legacy, governance and succession communication.

About the research: Calculated based on Campden Research estimate that there are 5,300 FOs in existence globally

Media contacts:

UBS:

Fiona Chan

+852 2971 8837

fiona-y.chan@ubs.com

 

Angela Yeh

+852 297 15751

angela.yeh@ubs.com

Campden Wealth:

Zuzanna Sojka

+44 (0) 20 3763 2827

zuzannasojka@campdenwealth.com

About UBS

UBS provides financial advice and solutions to wealthy, institutional and corporate clients worldwide, as well as private clients in Switzerland. The operational structure of the Group is comprised of our Corporate Center and five business divisions: Wealth Management, Wealth Management Americas, Personal & Corporate Banking, Asset Management and the Investment Bank. UBS’s strategy builds on the strengths of all of its businesses and focuses its efforts on areas in which it excels, while seeking to capitalize on the compelling growth prospects in the businesses and regions in which it operates, in order to generate attractive and sustainable returns for its shareholders. All of its businesses are capital-efficient and benefit from a strong competitive position in their targeted markets. Headquartered in Zurich, Switzerland, UBS has offices in 54 countries, including all major financial centers, and employs approximately 60,000 people. UBS Group AG is the holding company of the UBS Group. Under Swiss company law, UBS Group AG is organized as an Aktiengesellschaft, a corporation that has issued shares of common stock to investors.

Building on a deep understanding of our clients’ mindset, motivations and core values, we create bespoke solutions which are bold, innovative and tailored precisely to their individual needs. The four dimensions of Great Wealth – business, investments, passion, and legacy – form the basis on which we open a dialogue and begin a partnership with our clients across generations for generations, so that Great Wealth endures.

About Campden Wealth

Campden Wealth is the leading independent provider of information, education and networking for generational family business owners and family offices globally in person, in print, via research and online.

Campden Research supplies market insight on key sector issues for its client community and their advisers and suppliers. Through in-depth studies and comprehensive methodologies, Campden Research provides unique and proprietary data and analysis based on primary sources.

Campden Wealth also publishes the leading international business titles CampdenFB, aimed at members of family-owned companies in at least their second generation and private wealth advisers. Campden Wealth further enhanced its international reach and community with the acquisition of the Institute for Private Investors (IPI), the leading membership network of private investors in the United States, founded in 1991 and with the establishment of Campden Family Connect PVT. Ltd a joint venture with the Patni Family in Mumbai, India in 2015.