Key findings:
- Succession is a looming challenge within APAC
- Performance slumped in the region, with some strength in Hong Kong
- APAC Family Offices favour direct private equity/venture capital and co-investing
- Impact Investing is more prevalent in APAC Family Offices than other regions
Hong Kong, 14 November 2016 - UBS, in partnership with Campden Wealth Research, today released its Asia-Pacific insights from The Global Family Office Report 2016. The research surveyed principals and family office executives in 242 family offices, representing over USD 180 billion assets under management globally. Asia-Pacific accounts for 19% of family offices in the sample, with average assets under management of USD 492 million compared with USD 759 million globally.
The key findings
Succession looms large in Asia-Pacific
Succession of control from one generation to the next within family offices is an even more pressing issue in Asia-Pacific than the rest of the world. Within the next 10 years, 59% of Asia-Pacific family offices are expecting a generational transition and within 15 years 75% expect the same, according to The Global Family Office Report 2016.
Figure 1: Expected timing of the next generation transition
Column % | Asia-Pacific | Global |
1-5 years | 25% | 15% |
6-10 years | 34% | 28% |
11-15 years | 16% | 25% |
16-20 years | 16% | 17% |
21-30 years | 9% | 12% |
> 31 years | 0% | 3% |
Amy Lo, Head of UBS Wealth Management Greater China and Head and Chief Executive of UBS Hong Kong, commented:
"The report starkly identifies that one of the biggest single challenge facing family offices in Asia-Pacific is the risk of disruption from generational transition. This is a significant threat to family offices and the professionals who work in them, and the family wealth that they manage.
Encouragingly, the study finds that the challenge is on the radar of many family offices in the region. At UBS, many of our Asian billionaire entrepreneurial clients are increasingly focused on creating a family legacy. The rise of Asian family offices is a further reflection of clients' focus on succession planning, family business continuity and wealth structuring.”
Dominic Samuelson, CEO at Campden Wealth commented on the findings:
“Family office executives must ensure that their plans detail how they reach out and engage with both generations. The research does find a material reluctance by the younger generation to get involved and the older generation to let go of power, and this is particularly evident in Asia-Pacific.”
Performance strengthening after flat year
2016 to date has seen performance strengthen, 3.9% return, for Asia-Pacific family office portfolios. This follows a flat 2015 where family office’s portfolios value remain unchanged, 0% return. The 2015 performance reflected weakness in many of the underlying asset categories, and lagged family offices in North America and Europe due to specific exposure to developing market equities. In 2016 these same asset classes have rallied causing 2016 to be a better year for family offices.
Hong Kong family offices performed significantly better than compatriots in the region with an estimated 2015 portfolio performance of 0.8% return. This can be attributed to higher real estate holdings than the region as well as more holdings in developed market equities.
Asia-Pacific family offices hold relatively higher proportions of direct venture capital and private equity as well as co-investing, which account for 23% collectively (Hong Kong: 16%), compared to 14% for other regions.
Enrico Mattoli, Head of Greater China, Global Family Office, UBS Wealth Management, commented:
"This pattern is likely to be reinforced going forward, with private equity becoming increasingly important in the portfolios of Asia-Pacific family offices looking to benefit from the illiquidity premium associated with the asset class. Real Estate will continue to be a key component of FO portfolios as it continues to provide attractive long term real returns derived from both income and capital growth. We also expect Greater China family offices to look for real estate opportunities away from home markets to diversify their portfolios and look for new returns."
High operating costs still in evidence
Family offices in Asia-Pacific continue to be defined by high operating costs. On average, family offices have operating costs (excluding external manager performance fees) of 91.2 basis points of AUM, and 2015 external manager performance fees of 24.2 basis points. A significant component of these costs relate to investments, with family offices having investment teams of 4.9 people, compared with the 4.2 people globally.
Dominic Samuelson commented on the findings:
“The regional preferences for more hands-on direct investing means that family offices are having to bring in skills and resources in order to manage this, which inevitably adds to costs. Although there is some interesting debate within the Global Family Office Report 2016 about the merits of outsourcing particularly when you are a small family office.”
In Hong Kong, costs are slightly lower, with operating costs (excluding external manager performance fees) of 66.4 basis points of AUM, and 2015 external manager performance fees of 21.3 basis points. Hong Kong family offices favoured smaller numbers of staff. With only 6.8 staff in total and just 1.7 investment staff. This may explain the smaller cost of Hong Kong family offices.
Impact investing resonates regionally
Even more so than other regions, The Global Family Office Report 2016 found that impact investing is gaining real traction in Asia-Pacific. 67% are currently active or likely to be active in the future within Asia-Pacific compared to globally where it is 62%.
For Hong Kong Impact Investing does not hold as much sway with only 40% of family offices currently active or likely to be active in the future.
This corresponds with the higher percentage of control over philanthropy that Asia-Pacific family offices have, with 63% (Hong Kong: 71%) of family offices saying they manage the philanthropic activities compared with only 53% at a global level.
Eric Landolt, Head of Family Advisory Group, Asia Pacific, UBS Wealth Management:
"We observe a similar trend amongst our clients in Asia and Hong Kong in particular. Especially our young generation clients place an increasing importance to social returns rather than only focusing on maximizing financial profits. They are engaging into more strategic, innovative and goal oriented models to sustainably solve the social and environmental issues they care about. We estimate this shift from traditional donation based philanthropy towards investment based models focusing on achieving long term social impact to further gain in significance, in connection with the generational transitions of family office principals and the professionalization of family offices in the region."
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: The data quoted in The Global Family Office Report 2016 comes from a quantitative, online survey of 242 family offices conducted by Campden Wealth between February and May 2016. The average AUM of participating family offices was USD 759 million, and the regional split was as follows: North America (32% of respondents), Europe (40%), Asia-Pacific (19%) and Emerging Markets (9%). The majority (75%) of respondents were single family offices. Campden Wealth also invited a select group of multi family offices to participate. Unless otherwise stated, the data reflects the position as at the time of the survey completion by participating offices. The performance data in the report is calculated using the latest available calendar year’s data, in this case 2015. To more accurately measure annual change, the report looks at the results of ‘multi-year participants’ - those family offices that participated in the research in 2015 and 2016. In addition to the quantitative survey and to gain further insight, Campden Wealth conducted in-depth interviews with another 25 family office principals, executives and advisers.
Media contacts:
UBS:
Fiona Chan | +852 2971 8837 |
Campden Wealth:
Stuart Rutherford | +44 (0) 20 3763 2806 | stuartrutherford@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.
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Wealth Management provides comprehensive advice and financial services to wealthy private clients around the world, with the exception of those served by Wealth Management Americas. UBS is a global firm with global capabilities, and its clients benefit from a full spectrum of resources, including wealth planning, investment management solutions and corporate finance advice, banking and lending solutions, as well as a wide range of specific offerings. Wealth Management’s guided architecture model gives clients access to a wide range of products from the world’s leading third-party institutions that complement its own products.
GLOBAL FAMILY OFFICE GROUP
A joint venture between UBS’s Investment Bank and Wealth Management divisions, the Global Family Office Group focuses on servicing our most sophisticated clientele with institutional-like profiles and requirements. It offers holistic advisory services, direct access to UBS cross-divisional expertise across the globe, institutional business opportunities and an extensive peer network with dedicated teams in New York, London, Zurich, Geneva, Hong Kong and Singapore.
GREAT WEALTH
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 CampdenFO, the international magazine for family offices 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.
