Thai family offices poised for allocation shifts as next gen takes over
Thailand’s wealthy families – and family offices – are poised to experience changes in broad asset allocation trends and themes as wealth transfers from one generation to another, a family office executive told AsianInvestor.
“The transition is leading to a change in asset allocation shifts,” said Shiraz Poonevala, head of investments at single family office GP Group. “As wealth transfers from one generation to another, the whole investment philosophy and approach changes.”
“Patriarchs [first-generation wealth creators] were good at traditional investments, but the younger generation is willing to take more risks. So, I do foresee a huge change in the direction of where the investments will go,” he said.
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Typically, the first generation of wealthy families came from mostly traditional industries such as manufacturing, real estate and consumer goods. Investments have also tended to focus on those sectors as well.
The businesses might be decades old but as the original founders reach their 70s and 80s, the hope is their children will take over the family business empires.
The next 10-15 years will see signficant wealth transfers from one generation to another in Thailand, according to wealth experts.
A family office structure is, consequently, becoming popular as many wealthy families opt to simplify complex business structures and separate family and business wealth.
“Transition succession will be key for family offices for execute. It is quite easy to destroy significant value at this time,” said Poonevala.
In addition, the next generation may have vastly different interests and passions from those of the previous generation.
Many second-generation individuals of wealthy families are forging their own paths by starting companies around their interests or by capitalising on emerging opportunities.
Their investing interests are also fairly different from the previous generation.
“They are more open about new technologies such as cryptocurrencies and digital assets, and other forms of technology,” Poonevala said.
That trend is evident across the region: several surveys indicate that digital assets are gaining traction with family offices in Asia. Digital assets include everything from cryptocurrencies to non-fungible tokens.
“The older generation understands cash flow, but these new areas are not their expertise,” said Poonevala.
NEW TRENDS, ESG FOCUS
“The younger generation is also big on CSR, ESG and making an impact,” he added.
CSR refers to corporate social responsibility and ESG refers to environment, social and governance factors.
He noted that family offices are becoming increasingly mindful about considering the social and environmental implications of their investments as they seek returns.
With the next generation looking to diversify and spend more time on what they like to do and less on the traditional family business, there is a growing need to hire independent and skilled professionals to handle investments and to protect and growth the family’s wealth.
“A decent-sized family office could have between eight to 12 people,” noted Poonevala, adding that that establishing and developing a family office takes time.
“You cannot expect to build your family office operations straightaway -- it takes time."
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In addition, many wealthy younger Thais have studied abroad, and are eager to take their family operations overseas or invest offshore. “A lot of that is happening because of the family offices – there is confidence that they can succeed in any market,” said Poonevala.
“The business may have started in Thailand but today, they may have become truly global by investing in other markets.”
Some Thai family businesses that have gone global include the TCC group, which is behind the popular Chang beer, and owns Singapore-exchange-listed Thai Beverage; and CP group, which is among the largest shareholders of Chinese insurer Ping An.
Jurisdictions such as Singapore, Hong Kong and Dubai are also aggressively wooing wealthy families to set up family offices in their markets.
For example, the Chearavanonts, one of the wealthiest families in Thailand and owners of CP group, plan to set up a family office in Hong Kong, according to media reports in March.
The story has been updated with correct name of interviewee.