While family investment groups across Asia Pacific are concerned about the long-term impact of the coronavirus outbreak, their immediate priority is to help rebuild communities and businesses locally, and one way is to provide capital in various ways.

Family offices and their advisers told AsianInvestor they saw the virus as a game-changer in many areas of society, with massive implications. And they agree that, by virtue of their influence on growth in the region, they have a key role to play in how the environment will shift.

Covid-19 is “a black swan event that will definitely change the mindsets of many Asian business families”, said Cheong Wing-Kiat, former director of Singapore family office Wen Ken Group and now managing his own family's office, Business Concept.

Cheong Wing-Kiat,
Business Concept

Once the dust settles, he said, there will be a radical alteration of many contemporary family business models and operational structures.

“Business families have social and moral responsibilities and duties to help SMEs [small and medium-sized enterprises] in countries where they live and operate,” Cheong added.

SUPPORTING BUSINESSES

To support local businesses in the recovery process, he said, families could deploy their capital as loans to their portfolio companies and invest, by making convertible loans and buying preference shares in SMEs, such as suppliers and trade customers of their portfolio companies.

The Ayala family in the Philippines as a good exemplar of such practice, noted Philo Alto, Hong Kong-based managing partner of Asia Value Advisors, a philanthropic advisory platform. The family's property development arm, AyalaLand, is providing rent subsidies and income support for their business ecosystems. 

Many other family businesses will be doing the same, or deferring payments to ease the burden on suppliers and related companies.

“Our priority right now is not on getting the economy back in shape, but on what we can do to give support to needy NGOs [non-governmental organisations] and social enterprises to get through the current crisis,” Joan Shang, senior associate at Hong Kong-based family office RS Group, said.

Ultimately, Alto noted, “business as usual is no longer an option in the new normal, post-Covid-19 world. As the existential threats from the current pandemic subside, Asian families will already have individually and collectively identified ways to rebuild communities and their respective business ecosystems.”

GENERATION SHIFT

Another possible side-effect of the coronavirus crisis is that it may accelerate the transfer of influence to the younger generation, predicted Alto.

Philo Alto,
Asia Value Advisors

“The older generation will mainly be calling in their relationships, to help manage through the crisis,” he said. “The younger generation will be handed the opportunity to come up with innovation ideas and experiment with ways to reframe and repurpose their businesses.”

It may be too soon to call that change, although he does see a shift occurring in the families' investment focus, said Yee Tuck Meng, partner at Singapore family office JRT Partners.

A key change taking place is that family wealth is being propelled into medical technology investments, he noted. “That is what we are evaluating. For example, wearable technology is a particular focus for us right now.”

The medtech theme is an obvious one in the circumstances. Its profitability was highlighted recently when Li Xiting, Singapore’s richest man, reportedly made an estimated $3.5 billion in 2019 alone on his stake in Shenzhen Mindray Biomedical Electronics, a company he founded in 1991. The share prices has shot up thanks to demand for its ventilators.

LEARNING PROCESS

As the Covid-19 fallout plays out, there is expected to be a lively debate among Asian families as to what they can learn from this situation, to improve their investment choices.

Alto suggested it all depended how long the crisis goes on for. If the crisis resolves itself quickly, he said there was a risk that important lessons may be missed. “The tendency for businesses, families and policymakers to go back to business-as-usual are all too tempting,” he noted.

“However, if the pandemic’s impacts and eventual resolution becomes protracted,” he added, “real changes in behaviours and shifts in social norms may be integrated into the community ethos and daily habits over time.”

Ultimately, however, family offices told AsianInvestor it was too early to be talking about a broad economic recovery, and broader data tends to back them up.

The Asian Development Bank (ADB) on Friday (April 3) predicted growth in emerging Asia of just 2.2% this year, down from the 5.5% it forecast for the year in September 2019. Growth is then expected to rebound to 6.2% in 2021, assuming that the outbreak ends and activity normalises.