Family offices put focus back on equities: Research

Asia-Pacific family offices have recorded strong performance off the back of developed-market equities and private equity, according to latest research.

In a survey of principles and executives among 262 family offices, the Global Family Office Report 2017 found that after a year of poor performance in 2015, family offices' average investment portfolio bounced back to a notable 7% return in 2016.

North American family offices produced the strongest performance at 7.7% and Asia-Pacific family offices were a close second at 6.7%.

According to the report, equities (27%) and private equity (20%) now represent about half of the average family office investment portfolio.

Accounting for 16.2% of all family office investments, real estate was the third-largest asset class in 2017. However there are significant differences in levels of investment to this asset class between regions, as allocations of family offices in Emerging Markets (23.7%) and Asia-Pacific (20.3%) significantly exceed those of Europe (17.7%) and nearly double those in North America (10.2%).

When asked about their future intentions for asset allocations, most of the participating family offices are planning to maintain their current allocations to both developed-markets equities (60.6%) and developing-markets equities (48.6%). There is also intention to further grow private equity and co-investment allocations respectively.

UBS Wealth Management head of global family office Anurag Mahesh said: "In 2016, Asia-Pacific family offices dialed up risk allocations which resulted in higher equity allocations and a notable improved performance over the prior year."

"In 2017, given current valuations, they are currently focused on risk management, evaluating private equity and credit opportunities as against just public market opportunities whilst diversifying away from their home region. In terms of sectors, Asia-Pacific family offices are looking at healthcare, education and consumer/tech enabled sectors primarily in the US and Asia, China in particular," he said.

The report also highlighted a pick-up in succession planning amongst Asia-Pacific family offices, with about half (47.3%) of family offices claiming to have some form of plan in place, while 29.6% are still developing plans.

Family offices in Asia Pacific somewhat lag behind other regions when it comes to succession planning, as currently 13% have written plans in place and 19.4% have no plan at all.

UBS Wealth Management executive director, family advisory group, Asia-Pacific Edith Ang said she views the trend towards the development of succession plans as "positive", as greater emphasis is placed on the grooming, training and development of next generations to take over the family business compared to other regions.

"The next generations of Asian families have a much greater level of involvement in the family office compared to other regions. They are involved through participating in projects, sitting on the board, assuming management or executive roles in the family office, or participating in philanthropic activities. These are practical strategies to build working experience in the family office, and it prepares the next generation for their roles in the future and helps ensure a successful transition," Ang said.

Read more: Family officeUBSUBS Wealth ManagementCampden WealthGlobal Family Office Report
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