Boom coming, but Asian family offices must mature: UBS

Growth in family offices will catch up with the regional wealth explosion, but solutions can be especially complex since a substantial portion of this wealth is tied up in illiquid assets.
Boom coming, but Asian family offices must mature: UBS

Asia is set to see a boom in family offices, although they are less sophisticated and professional than they need to be and there's a lot of family wealth tied up in illiquid assets, finds new research.

There are estimated to be just 100 family offices in Asia-Pacific, meaning their proliferation is not in line with the regional explosion of wealth, according to a study by UBS and Campden.

While it is understood that wealth in Asia is less mature than in the US and Europe, the study found Asian offices were far more closely tied to family businesses, with 80% of respondents actively involved.

Only 40% of family wealth is invested in traditional asset classes such as equities and fixed income, with the remainder in the core business or other illiquid investments such as real estate.

That means private bankers can’t use traditional wealth solutions for a substantial portion of these portfolios and need to employ sophisticated institutional solutions instead, says Munish Dhall, head of UBS Wealth Management’s ultra-high-net-worth offering and client development.

He notes that while an average family office in Europe has 13 staff, in Asia that figure drops below six. “The conclusion is that family offices in Asia need to be very careful about what investment activities they do in-house, and how they want to use banks, for example,” he says.

As evidence that operations in Asia are less professional, Dhall notes that only 38% of respondents had formal risk policies in place. “There is a long way to go before they professionalise,” he says.

While he confirms that Asia is predominantly a single family-office market, he suggests that the lines between single and multi-family offices are becoming more blurred.

“What we are seeing in particular in markets such as China is that people are setting up single family offices with the ultimate vision that once they have established a track record and become a solid organisation, they will open it up to third-party assets,” he states.

Dhall expects to see more family offices emerge in Japan, China and India, although acknowledges that the bulk will be in Hong Kong and Singapore, as well as Australia – international markets with easy access to a range of global investment opportunities.

He adds that more European and US family offices are also setting up in Asia, either as a second arm or even as a main base of operations to better access local markets.

UBS has a family services team comprising 50 staff globally, of which 10 are based in Asia. They either help to set up family offices or conduct health checks and offer advice on streamlining and best practice. Dhall confirms the bank is building its corporate advisory capabilities, teams and presence in the region with a view to advising more business owners.

Last year UBS also established its global family office unit in Asia, providing investment solutions out of its wealth and asset management businesses and investment bank.

UBS and Campden conducted their survey of family offices with at least $50 million in assets under management in the third quarter of last year. It attracted 35 respondents, more than a quarter of which had over $1 billion. Campden then followed up with interviews.

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