http://www.businesstimes.com.sg/arch...-poll-20131023

Published October 23, 2013

Family offices to invest more in property: poll

Venture capital, private equity stay popular in Asia

By cai haoxiang [email protected]


AMID a property market boom that prompted curbs from policymakers, family offices in Asia still expect to raise their allocation to direct real estate investments in the next three years. Venture capital and private equity investments also remain popular, a report by Swiss bank UBS and research specialist Campden Wealth has found.

The report surveyed or interviewed more than 25 family offices in Asia-Pacific which manage a range of wealth, from under $100 million to over $1 billion.

David Bain, head of research at Campden Wealth, said that while Asia's wealthiest families are becoming more optimistic about investment returns, they are not putting more money in equities and hedge funds.

"On the contrary, they are cutting their investment allocations to these asset classes and, like their counterparts in Europe, investing more in direct investment opportunities like other businesses and property," he said.

Asked to give an expected asset allocation over the next three years, family offices said they plan to increase their property allocation from 16 per cent now to 22 per cent. Meanwhile, their cash holdings are estimated to drop from 14 per cent to 8 per cent.

The report noted that the preference for property is similar across other regions because property is seen as a low-risk asset with an easy-to-understand profile, even though it could become a speculative and risky asset to hold in some markets.

Equities will still take up about a quarter of family office portfolios, split into 16 per cent for developed market equities and 10 per cent for emerging market equities.

After equities and property come direct venture capital or private equity investments, taking up 15 per cent. Bonds will take up 12 per cent, with investment grade bonds more popular than junk bonds.

Meanwhile, family offices expect to cut their commodities and private equity fund allocations from 4 per cent each to 3 per cent each, keep their hedge fund allocation at 5 per cent, and invest 2 per cent each in real estate investment trusts, passion investments, and other tangible assets.

The report noted that last year, family offices were more inclined to invest in commodities.

The most promising sectors to invest in were healthcare and energy. This was followed by consumer discretionary and information technology businesses. The least popular were telecommunications, materials and utilities.

The most worrying aspect of financial markets for family offices were macroeconomic risks like inflation, and investment strategies pitched to them that were difficult to understand.

Citing the collapse of a couple of notable hedge funds, a Hong Kong family office chief investment officer noted: "If they can't give me the elevator pitch on how they make money, I'm not interested in them."

Family offices set up to manage wealth are still relatively rare in Asia as entrepreneurs here prefer to concentrate on their family business. But the report noted that Singapore and Hong Kong will see the most growth in family offices in the years ahead.