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Why some Asian family offices prefer working with VC, PE managers

Managing relationships with venture capital and private equity funds offers advantages beyond immediate returns, two family office executives told AsianInvestor.
Why some Asian family offices prefer working with VC, PE managers

Some family offices are keen to work with external investment managers for reasons ranging from on the ground expertise to ensuring portfolio diversification, industry participants told AsianInvestor.

Golden Vision Capital, the investment arm of a Singapore-based single-family office, likes to make use of private eqventure capital managers' on-the-ground expertise and partnerships, which extend beyond purely financial gain, to make investments.

“We prefer to work with managers who actively collaborate with family offices,” Riady Gozali, managing director at Golden Vision Capital, told AsianInvestor.

 “These managers typically have programs tailored for smaller investors, offering good access and co-investment opportunities.”

Riady Gozali
Golden Vision Capital
 

The family office is focused on investments in Southeast Asia and the US, and invests via buyout funds, growth funds, and venture capital funds globally.

“Approximately 80% of our funds investments are in global funds and  a majority of our investments are in companies in Asia,” said Gozali.

SIGNIFICANT IMPACT

Family offices have a significant impact as limited partners in certain private equity (PE) and venture capital (VC) funds, including first-time, emerging, and established funds.

While direct investments and co-investment alongside PE and VCs exist, many family offices see investing with external managers as a means to diversifying their portfolio.

Choosing the right manager remains the key.

“Hiring experienced advisors and expanding the network to include professionals with diverse industry knowledge can help achieve a balanced and diversified investment portfolio,” Gozali stated.

He also believes in balanced portfolio construction by setting a maximum limit on the amount of capital at stake with a fund manager.

“Typically, we invest between $2 to $10 million in a fund, aligning with our current fund of funds program, which has a size of over $70 million,” he added.

Carman Chan, founder and managing partner at Click Ventures, a Singapore- and Hong Kong-based single family office, shared similar views.

“Working with a VC fund as an LP offers several advantages,” said Chan.

“VC funds typically have more information and insights compared to family office teams because they are focused solely on venture capital investments. This focus allows them to have a deep understanding of the market and access to early-stage deals at more reasonable valuations.”

Carman Chan
Click Ventures

Both family offices look for companies raising financing from series B to later stages.

These rounds are often used to help the company grow and expand its market reach, refine its product, and further develop its business model.

JOINING THE ECOSYSTEM

Gozali felt that investing with funds is also a more pragmatic approach for smaller family offices.

“Beyond the financial returns, being part of the ecosystem provides valuable involvement opportunities. Investing in such partnerships offers non-financial benefits, such as staying informed about industry developments and trends,” he said.

ALSO READ: How Nan Fung family office selects external managers

“In the US, we primarily act as co-investors. This means we invest alongside fund managers in opportunities sourced through our PE fund or co-investment vehicles. For example, in debt deals, we depend on the fund manager to provide updates and manage the investment,” explained Gozali.

Family offices often see emerging managers as good partners.

Gozali looks at the pre-funding experience of these managers, their understanding and expertise of the sector they operate in, and their network.

“These managers are also usually more willing to share information and are more eager and hungry, which can lead to higher chances of achieving better returns,” Gozali said.

According to Pitchbook, a private and public market data provider, the average fund size for emerging managers in 2023 was $41.7 million.

This story has been updated with changes in para  2,3, 6 and 12.

Emerging VC managers frequently operate in niche markets or specialise in innovative strategies, offering family offices access to sectors and ideas that are not readily available through traditional investment channels.

“These GPs frequently manage very distinct assets, creating opportunities for arbitrage and generating remarkable returns,” Chan said.

ALLOCATION TRENDS

Larger family offices, however, still prefer direct investments. A recent UBS report highlighting global family office trends in 2023 showed that for those above $1 billion in assets, almost half of allocations went toward direct investments (49%).

These family offices often have arrangements with fund managers where the VC will reach out only when there is a specific deal or special purpose vehicle (SPV) opportunity.

Click Ventures’ Chan noted, “This type of partnership can still be positive but is limited. Occasional VC interactions risk missing out on highly sought-after opportunities in oversubscribed funding rounds.”

Despite the difficult time that the PE/VC space has seen over the last few years, family offices are confident in long-terms returns from the asset class.

Gozali noted that sector concentration is a risk many family offices must mitigate.

“A family office heavily invested in hospitality, or restaurants faces the risk of being overly concentrated in one sector. Diversification into non-correlated sectors like healthcare or technology is crucial to mitigate this risk,” he said.

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