APAC family offices have the highest investment returns

Key findings:

• Family offices in Asia Pacific and Emerging Markets had the highest investment returns at 6.2%
• Average investment returns globally stood at 5.4% for 12-month period
• 40% of Asia Pacific family offices now engage in sustainable investing
• Nearly half of Asia Pacific family offices have succession plans in place

Singapore, 3 October 2019 – UBS, in partnership with Campden Wealth Research, has launched its latest findings on APAC family offices. The Global Family Office Report 2019 surveyed principals and executives in 360 family offices around the world (80% single family office and 20% multi-family office), with an average of USD 917 million in assets under management.

86 family offices in APAC contributed to the survey, with an average family wealth of USD 908 million and USD 600 million in assets under management. This includes 20 family offices in Singapore with an average family wealth of USD 699 million and USD 467 million in assets under management.

Ravi Raju, Head Ultra High Net Worth APAC, UBS Global Wealth Management said

”As Asia’s largest wealth manager, we have been collaborating with Asia’s wealthiest families for over 50 years. Most of Asia’s wealthiest families are first generation entrepreneurs and it is encouraging to see that they are becoming more focused on sustainable investments. They have found that sustainable investments can generate equal or superior investment returns when compared to 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. With Asia set to undergo a wealth transfer, it is encouraging to note that almost half of APAC family offices have a succession plan in place. “

APAC average family office portfolio had the highest investment returns at 6.2%

The 2019 report looks at family offices’ performance from Q1/Q2 2018 to Q1/Q2 2019. Due to heightened geo-political, economic and financial market turbulence, the global family offices’ overall investment performance decreased from the previous year, with the average portfolio returning 5.4%.

Both Asia Pacific and the Emerging Markets’ family offices achieved the highest average returns at 6.2%. Developing market equities and bonds – to which Asia Pacific and the Emerging Markets continued to allocate more than the other regions – in addition to direct private equity investments, drove the marginal outperformance of other regions.

Within Asia Pacific, Hong Kong and Singapore family offices’ performances were at 3.5% and 5.2%, respectively.

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 real estate 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 real estate now accounts for 17% of the average family office portfolio both globally and in Asia Pacific.

Anurag Mahesh, Head Global Family Office, APAC, UBS Global Wealth Management, said:

“We continue to witness a strong and rising trend amongst Asian Family Offices to allocate their investments to Private Markets and Real Estate over the years. Given the strong preference of Asian Families for Real Estate and given their entrepreneurial roots, this doesn’t come as a surprise to us. Family Offices continue to also focus on risk management in these volatile times while also increasing allocation to sustainable and impact investing.”

“ We believe that our dedicated team of GFO Advisors, together with our experts from different parts of the bank like Wealth Management and Investment Bank, are well positioned to collaborate with our clients to address their wealth preservation and wealth creation needs in a holistic and bespoke fashion.”

A shift towards wealth preservation

Year-on-year, we report that it is most common for family offices to embrace a balanced, preservation

plus growth, oriented investment strategy. 2019 is no different, with 56% of respondents opting for a balanced approach.

This global trend is reflected in Asia Pacific family offices as well, as they too show a predominance of balanced approaches (57%), alongside a preference for preservation (23%) over growth (19%). At present, 23% of Asia Pacific based family offices are pursuing a preservationist investment strategy – a figure which is higher than the 7.7% reported in the 2018 Global Family Office 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.

In Singapore, 53% have adopted a balanced approach, 32% preservation and 16% growth. In Hong Kong, 60% have adopted a balanced approach, 15% preservation and 25% growth

Increasing allocation in sustainable investing

34% of family offices now engage in sustainable investing, while 19% of the average family office portfolio is now dedicated to sustainability. The latter number is predicted to rise to 32% within the next five years, which is unsurprising given that 85% of all sustainable investments have met or exceeded expectations.

In Asia Pacific, 40% of family offices are engaged in sustainable investing, while Singapore has 33% of family offices engaged in sustainable investing. 64% of family offices in Asia-Pacific believe that the majority of family offices globally will engage in sustainable investing by 2020.

A quarter of all family offices currently engage in impact investing. Of these, impact investing represents 14% of the overall portfolio on average. This figure is expected to rise to 25% within the next five years.

Similarly in Asia Pacific, 25% of family offices invest in impact investments, while Singapore has a higher proportion at 27% .

APAC family offices step up succession planning

There has been a marked increase in succession planning. Close to half (49%) of Asia Pacific family offices now have a succession plan in place.

The average age of an APAC Next Gen upon succession is 41 years old. For Singapore, the average age of the Next Gen upon succession is 39 years old respectively.

Nearly half (48%) of the APAC respondents believe that there should be an age limit on succession.

Susan Sy, Head, Family Advisory and Philanthropy Services, Asia Pacific, said “Legacy and succession planning is in the minds of many Asian families as we anticipate intergenerational wealth transfer happening in the next 15 years. Succession spans a series of complex matters involving family, business, and investments. Engaging current and next generation family members in open communication is an important process to help define a written family governance framework for succession. The key is to start early.”

Family offices on macro geo-political, business and economic trends

Globally, a large number of family offices are sombre in their assessment of public risk markets and are preparing themselves for potential market volatility. In line with the global trend, 56% of Asia Pacific family office executives are expecting a market downturn to commence by 2020. In response, family offices are beginning to consider safeguards to moderate potential losses and capitalize on new opportunities.

Nearly half (46%) of those surveyed in Asia Pacific are re-aligning their investment strategy to mitigate risk, while 39% are doing so to take advantage of opportunistic events. 1 in 5 (22%) surveyed are reducing leverage exposure within their investments.

Asia Pacific family offices were also asked for their views on macro geo-political, business and economic issues, with findings including:

• 93% believe that US/China relations will have major economic implications in 2020.
• 87% believe that artificial intelligence will be the next biggest disruptive force in global business.
• More than half (55%) think blockchain technology will fundamentally change the way we invest in the future.

Dr. Rebecca Gooch, Campden Wealth said:

“Family offices are cautious about geo-political tensions, and there is a widespread sense that we’re reaching the end of the current market cycle. While the average family office hasn’t made wholesale changes to its portfolio, many have been deleveraging their investments in anticipation of disruption ahead.”

Notes to Editors

About UBS

UBS provides financial advice and solutions to wealthy, institutional and corporate clients worldwide, as well as private clients in Switzerland. UBS' strategy is centered on our leading global wealth management business and our premier universal bank in Switzerland, enhanced by Asset Management and the Investment Bank. The bank focuses on businesses that have a strong competitive position in their targeted markets, are capital efficient, and have an attractive long-term structural growth or profitability outlook.

UBS is present in all major financial centers worldwide. It has offices in 50 markets, with about 31% of its employees working in the Americas, 32% in Switzerland, 19% in the rest of Europe, the Middle East and Africa and 18% in Asia Pacific. UBS Group AG employs over 67,000 people around the world. Its shares are listed on the SIX Swiss Exchange and the New York Stock Exchange (NYSE).

About UBS Global Family Office Group

A joint venture between UBS’s Investment Bank and Global Wealth Management divisions, the Global Family Office Group focuses on servicing our most sophisticated clientele with institutional-like profiles and requirements. It offers holistic advisory services, direct access to UBS cross-divisional expertise across the globe, institutional business opportunities and an extensive peer network with dedicated teams in New York, London, Zurich, Geneva, Hong Kong and Singapore.

About Campden Wealth

Campden Wealth is a family-owned, global membership organisation providing education, connectivity, research and networking opportunities to families of substantial wealth, supporting their critical decision-making, helping to achieve enduring success for their enterprises, family offices and safeguarding their family legacy.

Campden Research supplies market insight on key sector issues for its client community and their advisers and suppliers. Through in-depth studies and comprehensive methodologies, Campden Research provides unique proprietary data and analysis based on primary sources. Campden Wealth publishes the leading international business title CampdenFB, aimed at members of family-owned companies in at least their second generation.

Campden Wealth owns the Institute for Private Investors (IPI), the pre-eminent membership network for private investors in the United States founded in 1991, and the Campden Club, a global membership network for families and family office executives. Campden further enhanced its international reach with the establishment of Campden Family Connect PVT. Ltd., a joint venture with the Patni family in Mumbai in 2015.

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