Investment Pensions Asia

IPA: Family offices set to boom in Asia

Family offices are typically well-established in Hong Kong and Singapore, but a growing number of entrepreneurial families are showing increasing interest for similar setups in India, China, Taiwan, and South East Asia.

The study, Growing Towards Maturity: Family Offices in Asia-Pacific Come of Age, finds the rapid rise in the number of ultra-high net worth individuals and increasing intergenerational transition of assets and control in the region will fuel the fuel the growth of family offices.
Still, despite the massive growth in wealth to the Asia-Pacific over the past 20 years, the development of family offices continues to lag in the region. Estimates show that about 100 single family offices are based in Asia, compared with at least 2,500 globally, the majority in the US and Europe.

Roger King, Director, Centre for Asian Family Business & Entrepreneurship Studies at the Hong Kong University of Science and Technology says the notion of family offices is still very new in the region. “But in reality, many families actually have the notion of a structure that does the investment for the family itself and so forth.”

King says wealth preservation and growth, enabling families to maintain their certain lifestyles are extremely important. Family values, legacy preservation and notions of family harmony are also key concerns. “These are the things that are on the minds of many wealthy families.”

Issues such as family governance, asset allocation, risk management, global custody and philanthropy are gaining interest among the wealthy in Asia. Dominic Samuelson, Campden Wealth’s Managing Director, says: “A lot of the assets are still very closely and aligned to the operating businesses.”

“The biggest single challenge is how to generate yield returns with the markets as they are, and how to identify, attract and preserve good talent.”

Asia-Pacific family offices (both single and multi-family offices) have a large proportion of their assets tied up in core family business holdings and illiquid assets. Liquid assets only make up 40% of their total wealth, the study found. Families also worry about how to bring in the next generation to continue with the business operations. King says: “Good family relationship is one of the key things in terms of sustainability, sustainability not just to the family wealth, not just to the family office and but also harmony.”

“You can’t really have a sustainable family business if you don’t have a good family, where family members really feel that they are part of the family.”

In Asia, family offices are not big employers, the study finds. Almost 40% employ less than six full-time staff, with 63% of offices saying they employ family members. In Europe, single family offices employ an average of 13 people. Ming Wong, Vice Chairman at Social Investors Club Ltd. says about $250m is the minimum needed to start a family office, with full-time staffing. “The decision ultimately rest with how time would you be able to spend running a family office, what sort of role do you want to have running a family office, is it going to be a single family office or are you the entrepreneur who wants to grow it into a business?”

Hong Kong, Singapore and Australia are perceived to be the most attractive locations to set up family offices because of favourable economic, social and tax conditions, according to the study.

Family offices in Asia are typically use as means to professionalise and institutionalise the family’s wealth, organise the family’s business or run as a business setup to generate profits, Eric Landolt, Head of Family Services for North Asia at UBS says. Some family offices also think quite creatively to maximise their returns, he adds. “There is more interest in club deals, for direct investments.”

The study also finds for families, the number one cultural imperative is confidentiality, which affects family offices willingness to outsource services and appoint third party providers such as global custody services. For family offices that do outsource services, risk management has become extremely important, Landolt says.

“People are really looking into the external parties they are working with, what is the credit rating, the stability of the custodian, it’s very important now. They also want much more tools in terms of risk management, in terms of reporting, asset overview.”

Every family is unique in terms of size, ambition and aspirations and the families need to set up the goals right before setting up a family office, Samuelson says. “There’s no one solution that fits all.”

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