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Chinese FOs gain traction

China's rapid economic growth has led to the emergence of family offices in the country, but AUM is still lagging the rest of the world, according to a UBS WM report.

“A substantial 64% of the participants reported that their primary wealth management vehicle is a family office — single family office (30%), commercial multi-family office (16%), and private multi-family office and hybrid family office (9.2% each),” according to a recent survey by UBS Wealth Management, in collaboration with Campden Wealth and Family Office Think Tank.

At the same time, about three-quarters of the families said that they either established or joined a family office after 2010. In the last six years, interest has been growing, and almost one-third reported that they began using family office services in either 2018 or in the first eight months of 2019.

Beijing-based Family Office Think Tank collected data from 76 families with net wealth of at least RMB 350m ($50m), including those who already use family offices or plan to do so.

However, despite evidence of their recent growth, family offices in China still have a lot of room to expand.

For example, the average net wealth of the Chinese families who participated in the survey is around RMB 6.5bn, but the average AUM held on their behalf by family offices is RMB 4.2bn.

Thus, about 65% of net wealth is managed, which is similar to the rest of Asia-Pacific, but significantly lower than elsewhere in the world.

“Globally, average net wealth stood at $1.2bn and average family office AUM at $917m…[so] about 76% of net wealth is managed,” according to the report.

Limitations to growth

Separately, the survey also noted that “the maintenance of family wealth is the main motivation for establishing or joining a family office (47%)”.

“Of those who do not currently use family office services, around three-quarters are interested in either setting up a single family office (44%) or joining a multi-family office (33%),” the survey said.

Moreover, the survey added that “of those interested, 84% are actively taking measures”.

However, family offices are also facing challenges, including “establishing a family office structure, recruiting outside talent, and finding experienced service providers”.

 

Part of the Bonhill Group.