An IMGW Report
Asian family offices are increasingly adjusting their investment strategies to address rising geopolitical risks. These offices, which manage the wealth of some of Asia’s richest families, are gaining prominence, particularly in financial hubs like Singapore and Hong Kong.
Rise of Family Offices in Asia
Many Asian families are turning to family offices to manage their investments, leveraging the expertise and personalised services these entities offer. Singapore and Hong Kong have become the primary battlegrounds for attracting the largest clients and top investment managers. Currently, Singapore hosts around 1,100 family offices, while Hong Kong’s numbers have surged to over 2,700. This growth indicates a significant shift in how Asian wealth is managed, moving from traditional financial institutions to more private and exclusive family offices【Sources: Financial Times and Forbes, 2024】.
Collaborative Investment Strategies
To amplify their investment power, some of Hong Kong’s most notable families are collaborating under multi-family office umbrellas. Historically, many Asian families built their wealth through manufacturing. However, as wealth transitions to the fourth generation, there’s a notable shift towards real estate and digital assets. This evolution necessitates new operational approaches, particularly in how these family offices handle geopolitical risks and manage information flows.
Navigating Geopolitical Changes
The geopolitical landscape has dramatically transformed, requiring family offices to reassess their strategies. Information remains a critical asset, but the nature of the data analysed has evolved. Regular discussions with macro fund managers now heavily consider the changing geopolitical climate. For instance, due to US sanctions, family offices are steering clear of sensitive sectors related to strategic technologies, including Chinese artificial intelligence. While there’s confidence in China’s long-term growth, short-term portfolio adjustments are deemed necessary to mitigate immediate risks.
Diversification and New Opportunities
Chinese families, previously focused on local and regional investments, are diversifying their portfolios. They are moving away from tech giants like Alibaba and Tencent, seeking a broader investment mix. Many are exploring opportunities in Southeast Asia and US tech, reflecting a more global approach to investment.
Recruitment Challenges
The rapid expansion of family offices has led to recruitment challenges. There is a high demand for experts from private banks or leading wealth management firms to run these offices. However, there’s often reluctance to offer competitive salaries, creating a talent crunch in the sector.
Preference for Hong Kong
Despite recruitment concerns and ongoing tensions between the US and China, Hong Kong remains a preferred base for family offices. The city offers a higher sense of asset security compared to mainland China, making it an attractive location for managing global investments. Many billionaires have relocated their family offices to Hong Kong, buoyed by its robust wealth management sector.
Singapore’s Attractiveness
Singapore also continues to attract wealthy families, thanks to its favourable tax regime. Although a recent money-laundering scandal has led to increased scrutiny by banks, the city-state’s wealth industry remains robust. Families are increasingly investing in financial assets over tangible ones, with a growing acceptance of exchange-traded funds (ETFs) among Chinese investors.
Resilience and Growth in the Asia-Pacific Region
Family offices in the Asia-Pacific region have demonstrated impressive asset growth despite facing numerous challenges. According to a recent study, over half of the family offices in the APAC reported an increase in their assets in 2021, showcasing their resilience and adaptability in the face of uncertainty. The study revealed that 56% of family offices experienced asset growth, with an average increase of 15%. Furthermore, 71% of the surveyed family offices expressed confidence in the global economy’s trajectory, underscoring their optimistic outlook.
The report, jointly published by Raffles Family Office and Campden Wealth, surveyed 330 single family offices and private multi-family offices worldwide between April and September. Of these, 76 family offices were in the APAC region. Among these 76, 58% reported an increase in assets under management (AUM), with 32% seeing an increase of more than 10%. The total wealth of the surveyed APAC families stood at US$68 billion, with their aggregate AUM at US$41 billion. These statistics underscore the robust performance of family offices in the Asia-Pacific region, affirming their ability to navigate challenges and thrive in a dynamic economic landscape.
Reacting to Market Sentiments
Asian investment sentiment is highly reactive, with investors keen to avoid missing out on potential market shifts. While some US and European family offices are reducing their Chinese stock allocations, Chinese clients are holding steady, awaiting positive developments. This cautious yet patient approach highlights the long-term investment strategy adopted by many Asian families.
In conclusion, Asian family offices are adapting to a rapidly changing geopolitical environment by diversifying their investments and adopting new strategies to manage risks. The growth of family offices in financial hubs like Hong Kong and Singapore reflects a broader trend towards more personalised and strategic wealth management. Despite challenges, including recruitment issues and geopolitical tensions, these offices continue to thrive, playing a critical role in the management of Asia’s growing wealth.