Family office investments improve in 2016

14 September 2017   Category: News, Asia, China, Global, Hong Kong, USA, Europe, North America, Switzerland   By Hui Ching-hoo

Global family offices saw a significant boost in their investment performance last year due to the bullish run of public and private equities markets, according to Swiss banking group UBS.

A joint survey by UBS and information provider Campden Wealth earlier this year found that the investment portfolios of global family offices registered an average return of 7% in 2016, compared to just 0.3% in 2015.

North America family offices produced the strongest return of 7.7%, up from 0.3% in 2015. 

Asia Pacific (APAC) family offices posted an investment return of 6.7% following a flat performance in 2015. Within APAC, Hong Kong offices notched up a return of 5.9% in 2016, up from 0.8% in the preceding year.

Anurag Mahesh, head of global family office, APAC at UBS Wealth Management, says the gains were mainly driven by “encouraging results” in developed market equities, and of private equities.

Although APAC family offices posted lower returns than their North American counterparts last year, their allocations to private equities and direct real estate investments of 20.9% and 20.3%, respectively, were higher compared to the global figures, Mr. Mahesh says. The global allocation to private equities was 20.3% and to real estate, 15.8%.

Family offices in APAC also allocated 9.9% of their portfolios to emerging market equities compared to the global average of about 7%, he adds.   

"In 2016, Asia Pacific family offices dialled up risk allocation which resulted in higher equity allocations and a notable improved performance over the prior year,” Mr. Mahesh said at a press conference in Hong Kong on September 12.

According to Mr. Mahesh, APAC family offices currently focus on risk management, evaluating private equity and credit opportunities instead of just public market prospects, while also diversifying away from their home region.

They are looking at the healthcare, education and consumer, and technology sectors, primarily in the US, and also in China, he says.

The demographics of family offices in APAC are also changing, bringing with it a greater emphasis on sustainable investments.

Enrico Mattoli, head of global family office, Greater China at UBS Wealth Management, says family offices in Greater China are characterised by younger entrepreneurs or the so-called new wealth.

These investors are expected to maintain current asset allocations favouring equities, private equities, and real estate because these investments are seen to continue to provide attractive long-term returns, he adds.

But the survey found that sustainable investments, impact investing, and environmental, social and governance (ESG) criteria have become increasingly important to the next generation of wealth holders.

“We see younger family members in Asia Pacific bringing in new values focused largely on social and environmental impact,” says Mr. Mahesh.   

The findings are based on a survey of 262 family offices worldwide, including 42 in APAC, with total AUM of US$921 billion. The survey was conducted between February and May 2017.