Why family offices are beginning to pivot to ESG and high-tech
A generation gap is beginning to emerge in Asia's family offices as younger players show an increasing risk appetite for technology plays as well as ESG-related assets, according to speakers at a webinar hosted by AsianInvestor on Thursday (September 16).
While diversification is still the bedrock of stable returns in family offices, speakers at the Family Office Investment Insights heard how the pandemic has presented a particular set of challenges to portfolio diversification.
“It's only over the past five to seven years in Asia that family offices as a phenomenon have started to become better known,” said Conrad Tsang, founder and chairman at Strategic Year Holdings, a privately held investment company focusing on private equity and real estate.
“In a historically low interest rate-environment, and now with plenty of liquidity, family offices find investing in traditional assets is no longer meeting return requirements.
"This means they are starting to branch out and a lot of people are continuing to pave the way into alternatives such as hedge funds, infrastructure funds, PE and VC funds,” he said.
According to the PwC Global Family Business Survey 2021, 46% of family business owners felt the pandemic - which had a broadly negative impact on family business profits - had had a bigger impact on growth than the Great Recession.
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ESG TOP OF MIND
“The next generation is very mindful of what we invest in, how we invest, what the impact will be,” said Shiraz Poonevala, director of investment at GP Group, a Thailand-based strategic investment group.
In particular, speakers said, ESG concerns stood out for the younger generation when it came to investment.
“The next generation includes not just the siblings or wider family but also the impacted community. A lot of people, once they have made some wealth, they're giving back to society, believing that by giving out more you actually generate more,” James Wang, chief portfolio strategist at Ferretto Capital, said.
As a HK-headquartered family office, Ferretto Capital - which focuses on alternatives - aims to generate consistent long-term returns by allocating into a globally diversified portfolio of funds, Wang said.
SPAC AND CRYPTO
Some single-family offices are also in favour of relatively new market products such as special-purpose acquisition companies (Spac) and cryptocurrencies.
“We completed one Spac in April this year and our second Spac is close to completion and hopefully will be listed in October," said Kelvin Liu, managing director at Tsangs Group, a Hong Kong-headquartered single family office with a China focus.
"In terms of Spacs, the process for whole listings is faster than traditional IPOs and with higher liquidity. Of course, warrants are also one of the attractions. For the last two years, sectors have included AI, biotech, electric vehicles which are among the favored choices,” he said, adding that the group so far has very little exposure to blockchain and cryptocurrency assets in their portfolio.
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Family Office Investment Insights was held on September 16.