Among family offices in Asia-Pacific, Singapore leads in private equity investments, with 34% of family offices in the Lion City investing in the asset class, according to a Cerulli Associates report.
Singapore is followed by Hong Kong (26%) and India (17%), according to the report, noting that a majority of the family offices in the region are established in Singapore and in Hong Kong.
Private equity is one of the fastest growing asset classes in Singapore. In 2017, private equity assets grew to S$186bn ($135bn) from S$152bn ($112bn) in 2016, according to the Monetary Authority of Singapore’s latest asset management survey.
“While HNWIs are slowly warming up to private equity, ultra-HNWIs are already in the game through their family offices,” the report said.
“With uncertain and volatile market conditions, it is not surprising that investors are turning to lowly-correlated strategies, which serve as good diversification tools for portfolios dominated by traditional assets, as they look for other avenues to achieve higher returns.”
The report added that family offices in Asia prefer to participate in the entire private equity investment process and offer their advice on business strategies to portfolio companies they invest in. Citing data from Prequin, Cerulli said that the percentage of Asian family offices with a preference for co-investments (76%) is higher than their counterparts in Europe (55.3%) and North America (53.7%).
On the average, family offices in Asia-Pacific have around 15% of their assets in direct private equity investments, which is on the same level to their bond allocation, according to UBS and Campden Wealth’s 2018 global officer report. That percentage is higher compared to their 4.9% allocation to private equity funds.
Institutional investors in the region are also increasing allocations to private markets, with 40% of them planning to increase asset allocations to private equity, according to a recent Blackrock survey.
Rising PE capabilities
With rising demand for private equity investments, a number of asset managers have started to bolster their alternatives capabilities.
For example, Value Partners is developing alternative offerings for professional investors, King Au, the firm’s CEO told FSA previously. These include an Asia-focused private debt fund, a real estate fund and a private equity fund that will focus on private vocational schools in China.
In September, Franklin Templeton entered into a joint venture with Hong Kong-based Asia Alternatives, which is an Asia private equity fund-of-funds specialists. The JV, Franklin Templeton Private Equity, will provide investors with global private equity fund-of-fund products.
Barings collaborated with iCapital Network in July last year to allow its high net worth clients to access alternative investment strategies, including private equity, according to the Cerulli report.
Malaysia-based Affin Hwang Asset Management in June launched a private equity business, Bintang Capital Partners, in response to rising demand from the firm’s institutional and high net worth clients for more sophisticated investment solutions.
In December last year, Singapore-based Fullerton Fund Management appointed Tan Huck Khim in the then newly-created role of head of private equity, in which Tan is responsible for driving the firm’s private equity strategies.
Family offices expand capabilities
Separately, the Cerulli report added that family offices in Asia are expanding their offerings to include asset management services for external investors.
At least eight Asia-based family offices have already offered or are looking to establish funds accepting third-party capital. For example, Tolaram Group’s Singapore-based family offices announced in 2018 that it plans to create a hedge fund, which will include $100m of its own assets and external capital, according to the report.
“Although these family offices have hired experienced hedge fund staff, it is unlikely that their expansion into such sophisticated services will represent a huge threat to asset managers in the near-to-medium term,” the report said.
Cerulli explained that market players have expressed concerns over several issues, including conflicts of interest between the family’s and the fund’s objectives, as well as limited transparency on fund performance and track records.
