An inaugural family office report has found that despite geopolitical instability and uncertain market conditions, Asia Pacific family offices remain optimistic, with 84% expecting an increase in their family’s wealth this year and 77% expecting to see their AUM rise in 2024.
They are also more likely than their global counterparts to scale up their initiatives and gain added expertise, with 48% of Asia Pacific-based family offices looking to increase their reliance on outsourcing services, which is higher than the global average of 34%, according to the Deloitte Private and Raffles Family Office (RFO) joint The Family Office Insights Series—Asia Pacific Edition launched this week.
The report’s conclusions were based on 354 single family offices surveyed globally, including 89 family offices from Asia Pacific, between September and December 2023. Additionally, 15 in-depth interviews were conducted with senior family office executives in Asia Pacific. Globally, family offices have an average AUM of $2.0bn, and in Asia Pacific, the average AUM is $1.0bn.
Despite macro uncertainties and market volatility, family offices in Asia Pacific have shifted towards more growth-oriented investments (34% of respondents). However, this is coupled with an eye on risk management, with many family offices favouring a balanced investment portfolio, according to the report.
The top asset classes family offices invested in were equities (25%), private equity and private debt/lending (21%), real estate (19%), and fixed income (19%) in 2023, accounting for over four-fifths of the average family office portfolio.
Allocations to public equities, although the same as the global average at 25%, had a greater bias toward developing markets, revealing the region’s preference for local markets, such as China and India. The top asset classes family offices are looking to invest more in 2024 are developed (32%) and developing (24%) market equities, real estate (31%), hedge funds (24%), and cryptocurrency/digital assets (24%).
On average, Asia Pacific-based family offices allocate 32% of their portfolio to investments outside their own region. Currently, North America and Middle East-based investments make up 21% and 1% of Asia Pacific family offices’ average investment portfolio, respectively. However, these proportions are expected to increase in 2024, as 23% plan to allocate more to North America this year and 21% to the Middle East.
Meanwhile, investment levels in Asia Pacific and Europe are expected to remain consistent, with 69% and 79%, respectively, citing that they intend to keep allocations towards these regions the same in 2024. Asia Pacific has become a popular investment destination for global family offices, with an average of 20% of family offices worldwide and 24% from Europe planning to expand their portfolios in the region this year.
Macro-level risks underline the uncertainties Asia Pacific family offices face, with Geopolitics (55%) and inflation (44%) are perceived as two key market risks in 2024, while investment risk (72%), geopolitics (44%), and regulatory and tax challenges (28%) are considered to be major risks to family offices this year, in line with their global peers.
Investment risk management is a top priority (67%), followed by investment governance and valuation policies (53%), and succession planning (38%).
Succession planning preparedness
Indeed, planning for succession is rapidly becoming an important issue, according to the report. Over a third (35%) of Next Gens are expected to assume control of the family wealth over the coming decade. However, a notable 37% of families are currently without plans for succession. As a result, roughly a fifth of family offices (21%) have ranked this lack of preparedness as a core risk to their office this year, while over a third (35%) are now making succession planning a top 2024 priority.
Although 69% of respondents expect a next-generation family member to lead the family office post succession, many cite concerns over Next Gens’ maturity (49%), limited qualifications (36%), and lack of interest in the activities of the family office (23%).
Yali Yin, Asia Pacific Deloitte Private leader, commented: “Beyond risk management, diversified and sustainable investing, and operational technology adoption, leaders are focused on creating robust succession planning strategies to properly equip the next generation and produce a resilient future.”
Yet, Asia Pacific is leading a broader trend towards professionalising the family office, with 43% family offices looking to shift towards more professional and non-family staff this year, substantially higher than the global average of 29%.
“As more ultra high net worth families seek professional support for their wealth and legacy planning needs, the growing professionalisation of family offices in Asia Pacific revealed by our research is an encouraging sign of the region’s maturing family office ecosystem,” said Chi-man Kwan, group chief executive officer at Raffles Family Office.
