Family offices eye new areas of investment
Real estate, particularly branded assets like hotels, has long been the core investment of wealthy Asian families. But now they are increasingly branching out into new areas such as technology, healthcare and energy.
“We’re talking about things that are very tangible, where you can tell they’re going to make money very quickly,” said Charles Wan, vice-president at family office advisory firm Atlantic Pacific Capital.
Chinese healthcare, for instance, has been hot for a few years now. It is now getting segmented into early-stage biopharmaceutical healthcare and later-stage private equity healthcare services. And in such niche areas, it’s helpful to have partners who know what they are doing.
“I would love to get into healthcare and biotech, but I don’t have the domain expertise,” said Timothy Tsui, managing director of Hong Kong family office Arbutus. “My main focus would be on therapy and medicine research rather than physical healthcare, even though it’s a lot more risky. But I’m looking into it.”
Tsui is seeking physical healthcare opportunities in the US and Europe, where he sees clearer exit paths from investments than in China’s healthcare sector. He sees particular opportunities in research in therapy and medicine.
“You have a lot of US, European and even Chinese companies looking to buy you any time, if your R&D [research and development] is good and you’ve passed certain milestones,” said Tsui.
Technology attraction
Technology in general is also a growing focus. Arbutus recently partnered with a Malaysian family, looking at investing in this area. Tsui said they want to move quickly to learn how to get the best out of a deal, though they have no concrete plans yet.
“Some of the younger generation in these families want to have more tech exposure, but they may not be able to get it themselves,” he noted. “Malaysia tends to lose a lot of its tech talent to Singapore, which offers generous tax and other subsidies for firms who locate there.”
For example, taxi-hailing service Grab was founded in Malaysia five years ago, but grew after a move to Singapore. Its investors include hedge fund Tiger Global, Chinese venture capital firm GGV Capital and Vertex Venture Holdings, a subsidiary of Singapore sovereign wealth fund Temasek.
Through its tech investments in Asia, Arbutus has moved into the e-commerce and retail sectors. Tsui said: “We are at an interesting time globally. Younger people are taking the reins of businesses—they see the world in a different way.”
Social investing
Another growing focus for wealthy families is socially responsible investing.
Patricia Woo, partner at Hong Kong law firm Squire Patten Boggs said one of the most impressive products she worked on in 2016, from a social perspective, was a fund created for a charity whose managers wanted to invest into industries with a socially responsible theme, but with an investment return policy. She created a fund in which the charity was a special limited partner alongside family office investors and a GP, and it took part of the returns of the fund.
In Singapore, Cheong Wing-Kiat of Wen Ken Group, a family office that manages the wealth of family-owned Chinese medicine business Wen Ken Drug Co, has long advocated social investing, but feels public market investments look too highly valued this year.
Instead, he is looking to private equity with an emphasis on environment, social and governance (ESG) factors. The best way for families to embrace ESG, said Cheong, is to invest in companies that support or are directly involved in businesses connected to environmental and social issues.
Leaders from family offices across the region will gather in Hong Kong on May 9 for AsianInvestor's 3rd Family Office Forum Asia. Click the link to register or find out more.