Asia family offices expect to increase investment outsourcing
Family offices in Asia are gearing up for a significant uptick in the outsourcing of investment activities in the coming years, according to a survey by investment management firm Ocorian.
At the same time, the integration of environmental, social, and governance (ESG) criteria is set to play a pivotal role when it comes to Asian family office investment preferences.
The survey of 31 family office investment managers in Asia, who are collectively responsible for more than $15.3 billion assets under management, showed that around 90% say outsourcing will grow over the next three years, with 42% predicting a dramatic increase over the same period.
Robin Harris, regional head of Asia Pacific at Ocorian, told AsianInvestor that diversification into new asset classes or markets can play a significant role in the need for outsourcing.
One major example of this is the need to access specialised knowledge and expertise when venturing into new investments.
“By outsourcing certain functions or tasks related to these new areas, family offices can tap into the expertise of external service providers who have experience and knowledge in those specific asset classes or markets. This allows family offices to benefit from the specialized skills and insights of these providers,” Harris said.
More specialised services (74%), rising risk appetite (52%) of family offices, believe regulatory pressure push (48%) family offices in Asia and cost efficiency (29%) are listed as some reasons covered in the survey.
RISING RISK
Diversification into new asset classes or markets may require additional resources and capabilities that family offices may not have in-house.
By outsourcing certain functions, family offices can gain access to a flexible and scalable workforce that can adapt to the changing needs of the business, Harris pointed out.
“This allows them to efficiently manage the increased workload and complexity associated with diversification,” he said.
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Risk management also encourages family offices to outsource certain functions, as diversification into new asset classes or markets inherently involves taking on additional risks. By outsourcing these functions, family offices can leverage the expertise of external service providers specialised in risk management and compliance.
“These providers can help family offices navigate the regulatory landscape and ensure compliance with relevant regulations, reducing the potential risks associated with diversification,” Harris said.
ESG FOCUS
90% of the surveyed family office professionals agree that ESG principles are a key consideration when it comes to Asian family office investment priorities, with 52% strongly agreeing.
The survey further indicates that nearly all respondents (97%) view ESG adherence as a component of their fiduciary duty, and a substantial majority (87%) predict an increasing focus on ESG from a fiduciary perspective in the coming three years, with 45% anticipating a dramatic increase.
These findings underscore the pivotal role of ESG criteria in shaping the future investment landscape for Asian family offices. They are not only acknowledging the importance of sustainable and responsible investments but are also poised to adapt their strategies accordingly, according to Harris.
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"By prioritising ESG principles, Asian family offices may seek investment opportunities that align with their values and contribute to positive environmental and social outcomes. They may actively seek out companies or projects that demonstrate strong ESG performance, such as those with sustainable business practices, social impact initiatives, and effective governance structures,” he elaborated.
Harris also believes that the influence of ESG considerations extends beyond investment selection, impacting the entire decision-making process for these family offices
“They may conduct thorough due diligence to assess the ESG performance of potential investments, considering factors such as carbon footprint, diversity and inclusion practices, supply chain sustainability, and ethical business conduct,” he said.
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