The report found that family offices in Asia Pacific had the highest investment returns among family offices in other regions in a 12-month period, generating 6.2% compared with an average return of 5.4%.
“Developing market equities and bonds – to which Asia Pacific [and the Emerging Markets in general] continued to allocate more than the other regions – in addition to direct private equity investments, drove the marginal outperformance of other regions,” according to the report compiled by UBS Global Family Office Group with Campden Wealth Research of 360 family offices around the world with an average of $917m in assets under management (AUM).
Private markets fared the best of all asset classes for family offices globally, with Asia Pacific’s performance of 19% outstripping the global average of 16%.
The performance of property also held up well, with a global average return of 9.4% and Asia Pacific at 8.9%. Family offices have increased their allocations to this asset class by 2.1 percentage points globally, and property now accounts for 17% of the average family office portfolio both globally and in Asia Pacific.
“Given the strong preference of Asian families for [property] and given their entrepreneurial roots, this doesn’t come as a surprise to us,” said Anurag Mahesh, head global family office, Apac at UBS Global Wealth Management at a recent media briefing.
In total, 86 family offices in Asia Pacific contributed to the survey, with an average family wealth of $908m and $600m in AUM. This included 21 family offices in Hong Kong with average family wealth of $1bn and $813m in AUM.
However, Hong Kong family offices did less well with their investments, generating only 3.5% between the second quarter 2018 and second quarter 2019, while global family offices’ overall investment performance decreased from the previous year, because of “heightened geo-political, economic and financial market turbulence”, according to the report.
In line with the global trend, 56% of Asia Pacific family office executives are expecting a market downturn to start by 2020. In response, family offices are beginning to consider safeguards to moderate potential losses due to the US-China trade dispute and prepare for new opportunities in new technologies, by mitigating risk and reducing borrowing.
Typically, family offices prefer a balanced, preservation plus growth investment strategy, according to the report.
This global trend is reflected in Asia Pacific family offices as well, as they also show a preference of balanced approaches (57%), combining capital preservation with growth, although 23% of them are pursuing a preservationist investment strategy – a figure which is higher than the 7.7% in last year’s report.
“This might be due to a shift in ideology as families – many of whom generated their wealth in recent years – are starting to concern themselves with safeguarding their wealth long-term,” said the report.
New trends
In Asia Pacific, 40% of family offices are engaged in sustainable investing, compared with 34% globally, while 64% of them believe that the majority of family offices globally will engage in sustainable investing by 2020.
“They have found that sustainable investments can generate equal or superior investment returns when compared with traditional investments. Increasingly, we have also collaborated with many Asian family offices on their investments in private equity and real estate, as they are interested in growth and venture opportunities,” said Ravi Raju, head ultra high net worth Apac at UBS Global Wealth Management at the briefing.
The report also found that 49% of Asia Pacific family offices have succession plans in place a engage in sustainable investing and 48% of the them believe that there should be an age limit on succession – the average age of an Apac “Next Gen” upon succession is 41 years old.
“Legacy and succession planning is in the minds of many Asian families as we anticipate intergenerational wealth transfer happening in the next 15 years,” said Susan Sy, head, family advisory and philanthropy services, Asia Pacific at UBS Global Wealth Management at the briefing.
