European family offices are establishing Asian bases in increasing numbers, reflecting the eastwards shift of investment capital and a growing opportunity for asset managers and other service providers*.
“Over the past four to five years we’ve seen more and more non-Asian families setting up SFOs [single-family offices] here,” said Bernard Fung, Asia-Pacific head of family office services at Credit Suisse. “This trend really picked up after 2008 – it made sense for the SFOs in mature Western economies to diversify away from markets that surprised everyone in the financial crisis.”
These investors have come to realise they are too underexposed to emerging markets, notably Asia. As portfolio allocations have sought to catch up, investment teams have followed.
“The pace and volume [of western FOs launching in Asia] has definitely increased year-on-year,” Fung added, declining to give actual figures. He pointed out that Credit Suisse held its first dedicated regional family office forum this year in Hong Kong.
London-based SandAire was set up as an SFO in 1996 by Alexander Scott after he sold his family’s UK-based Provincial Insurance business. It took in external clients to become a multi-family office (MFO) in 2002 and opened a Singapore branch in July last year.
In continental Europe, Theo Müller, owner of German yoghurt-maker Müller, expanded his family office to Hong Kong in late 2012. And Alta Advisers, the FO of Swedish billionaire Hans Rausing, whose father built the Tetra Pak packaging empire, opened a Singapore office in early 2011.
Swiss firm Nutrimenta – originally created as an SFO for the Jaglom family, but which started taking in clients as an MFO in 1972 – opened in the same location, also in early 2011. Another Lion-City arrival in the same year and city was Parly, the FO of Italy’s centuries-old Spinola family.
Family offices seeking to invest substantially in Asia for their own business need to be on the ground, argued Stephan Repkow, Asia head of private banking at Union Bancaire Privée, which in May set up an MFO in Hong Kong and Singapore.
“There’s a limit to how much you can manage the complexity of growing the business, and partnering and entering new ventures without being on the ground,” he said. China, Indonesia and India are becoming massive onshore business opportunities that cannot be easily tapped from London, Paris or Geneva, he added.
One Swiss SFO initially felt it could do Asian investment remotely via external fund managers, the organisation’s Asia head told AsianInvestor.
But it realised that it wasn’t learning much about Asia that way, so it set up a regional branch that now has three employees. The main driver was geographic diversification, he said. “We also get to meet a lot more people here, on a lot of different levels.”
The office makes investments in Asia via funds, mostly private equity strategies, because it lacks local capabilities to be able to go direct. It does a small amount of co-investment but mostly allocates to funds, with a preference for smaller vehicles of between $100 million and $500 million. The FO views such strategies as more effective in the region because they are more nimble than big PE firms with multi-billion dollar funds.
Since its establishment in London, SandAire has been investing in Asia as part of its global asset-allocation strategy, typically via third-party managers. But the firm felt it needed a presence in the region to be closer to investment opportunities and fund managers, said Nadav Lehavy, head of the Singapore-based business.
Another motivation was a desire to attract ultra-high-net-worth Asian-domiciled families as clients. It has succeeded in doing so, although Lehavy declined to say how many such families have come on board.
Meanwhile, Middle Eastern families are also starting to consider moving assets to Asia for country risk diversification purposes, said Philippe Legrand, Hong Kong-based chief executive at MFO London & Capital Asia.
These families had traditionally put their assets in Swiss banks and in property in London, but are now making enquiries regarding future steps. Legrand has also been speaking to French and Italian families for similar purposes.
Of course, those European MFOs looking to service Asian families face competition for business from the growing number of homegrown MFOs and external asset managers being established in the region. Caidao Wealth, Inner Sanctum and Waterfield Advisors are among those to have sprung up in the past few months alone, not to mention Swiss firm UBP's new platform, as reported.
*See AsianInvestor's September issue for the full cover story on European families setting up offices in Asia.