Asian family offices warm to foreign partnerships

Wealthy families are not known for their willingness to share information and investment opportunities, but that dynamic is shifting as it gets harder to source good private deals.
Asian family offices warm to foreign partnerships

Five years ago several Asian family office executives told AsianInvestor that they were not interested working with wealthy people or families in, say, Europe or the US to source and make investments.

But as it has become harder to find good opportunities in Asia and horizons have broadened, that attitude has begun to soften. Families in the region are increasingly looking to expand their portfolios through private market deals across the globe.

It’s becoming harder for offices investing rich families’ wealth to find really compelling investments, said Timothy Tsui, managing director of Hong Kong family office Arbutus.

 “Now we are partnering with other families, either in the US or Europe, and some in Hong Kong and Southeast Asia, to co-invest or the find the best opportunities,” he told AsianInvestor.

Tsui pointed to his family office’s ability to create a San Francisco residential property fund and source real estate in the US city, through cooperation with a family office there. The latter has much better access and on-the-ground information for deals and on the local market than Arbutus, noted Tsui.

Intra-regional deals are also taking place. Arbutus recently partnered with a Malaysian family, looking at investing in technology. 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.

Quicker decision-making

Cooperation breeds opportunities too. Patricia Woo, partner at Hong Kong law firm Squire Patten Boggs, says her family office clients can increasingly source good deals outside the mainstream.   

“Family offices sometimes have access to deals that are not available to banks,” Woo said. “Because investees have this impression, which is pretty accurate actually, that family offices are able to make decisions much quicker than banks or institutions.”

Timothy Tsui, Arbutus

Families that cooperate across borders have an advantage: local individuals typically hear of and access opportunities faster than foreigners.

“These first looks are very important,” said Tsui. “If our partner looks at them first, we can get access much quicker. We also help them diversify their risk, so they don’t have to write the full cheque [for a multi-million dollar investment.]”

They also have expertise in their region, he said, bringing sound judgment and therefore real value to the deal.

Reciprocity is key

For high-net-worth families, cooperating with peers in other countries is, first and foremost, down to reciprocity. “It’s what value can you bring to the table,” said Tsui.

This can come in various forms. Tsui said a wealthy Chinese investor might be able to advise a Swiss partner on a tricky automotive deal in mainland China. Sometimes this won’t relate to the transaction they are working together on. What’s key is the potential to ask – or call in – a favour. 

One way family offices work together is to structure a fund with several families involved to invest in a number of specific projects.

While such funds can include many members, they often have small, close-knit communities. A lot of Woo’s work in 2016 centred on creating internal funds, or funds shared by a handful of families.

“All these activities are happening outside of the banks. These families seem to like the independence and flexibility that they can build into these internal funds, to set the terms,” she said. “We have seen a lot of side letters [special terms for certain investors in a private equity fund], so it’s highly tailor-made.”

Regional divide

While families are increasingly comfortable working together, how they do so varies across the region. Charles Wan, vice-president at Hong Kong-based family office adviser Atlantic Pacific Capital, sees differences in approach from north to south.

“The northern families are the guys who want to go direct; they want to be a proactive party,” he said. “Many are Hong Kong families and some are syndicated – five or six investors in one vehicle. This would be Chinese families coupled with Hong Kong family offices, typically.”

However the deals get done, it is clear that such relationships are making wealthy families an increasingly international, and influential, investing force. 

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