The Asia-Pacific Family Office Report 2023 says families in the region have proven their adaptability in navigating the dynamic market conditions. Their investment performance exceeded expectations, and they significantly outperformed the weakness evident in most major financial markets.
The report, jointly published by Raffles Family Office and Campden Wealth on Tuesday (Dec 12), is the result of a survey conducted between April and September among 330 single family offices and private multi-family offices worldwide. Of the 330, 76 of these family offices – nearly a quarter of the sample or 23 per cent – were in Apac.
Among the 76, 58 per cent reported an increase in AUM; 32 per cent booked an increase of more than 10 per cent.
The total wealth of these Apac families in the survey stood at US$68 billion, and their aggregate AUM stood at US$41 billion.
To counter the impact of inflation and rising interest rates, Apac families were found to have adopted innovative asset-allocation strategies, which included shortening the duration of fixed-income bond portfolios, reducing borrowings, and increasing exposure to equities.
The challenging financial markets of 2022 temporarily altered these families’ investment strategies, but Apac family offices have since gone back to pursuing growth strategies.
In 2022, the percentage of these family offices pursuing a growth strategy dipped to 33 per cent from 35 per cent. In 2023, it rebounded to 36 per cent, and is projected to reach 43 per cent within five years.
Kwan Chi-man, group chief executive and co-founder of Raffles Family Office, said: “Asia-Pacific family offices are evolving at a remarkable pace, embracing innovative strategies to navigate the dynamic markets.”
Around 15 per cent of the family offices in Apac are now under the control of their next generation – a figure which is expected to hit 47 per cent over the next five years.
This indicates a significant generational shift, and signifies a profound change in the region’s investment and management strategies, said Kwan.
Popular asset classes
The report noted that in previous years, the priorities of these offices were usually seeking new investment opportunities and diversifying their portfolios.
But in 2023, both these priorities were eclipsed by the pressing need to hedge against inflation risk and to explore alternative asset classes.
As a result, real estate emerged as the top asset category for future investments; 39 per cent of Apac family offices said they intended to grow their allocations in this area.
Developed-market bonds and developed-market equities were also identified as categories that are likely to pull in significant new investment; some 32 per cent said they planned to boost investments in private debt.
Apac family offices have been steadily growing their allocation in private markets, which are now the second-largest asset class.
When combined, private equity, venture capital and private debt comprised 26 per cent of the average Apac family office portfolio, nearly in line with the global average of 27 per cent.
Family offices are also expected to continue focusing on Apac, excluding China, and the US. They are also beginning to make meaningful investments in Africa and the Middle East, regions in which they have virtually no existing allocation, the report said.
Among new technologies, artificial intelligence (AI) is the most sought-after from an investment perspective. A net 32 per cent of family offices said they were actively looking to step up their engagement in AI; an additional 39 per cent said they were planning to initiate an exposure.
Climate change mitigation, fintech and healthcare remained popular for new investments in technology.
However, family offices seem to be actively divesting from cryptocurrencies.
The report expects wealth-aggregation platforms to be the next “thing”, with 30 per cent of Apac family offices expressing a keen interest to leverage these solutions.
These platforms, and similar software solutions that offer an overview of an organisation’s financial position by consolidating data from multiple banks and investment managers, currently have a low adoption rate, at 30 per cent of family offices.
Among the family offices surveyed, Singapore had the highest percentage of these privately held companies that handle investment management and wealth management for one or more wealthy families – at 24 per cent.
Hong Kong accounted for 20 per cent, India was at 19 per cent, and Australia followed at 16 per cent.
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