HONG KONG - The number of people with high net-worth wealth in the Chinese mainland has jumped dramatically in recent years and many of them have opened family offices in Hong Kong over the past 12 months, wealth managers at Swiss-based bank UBS say.
Anurag Mahesh, the Asia-Pacific head of the global family office group at UBS Wealth Management, told China Daily that they had seen more and more family offices being set up in the past year. Since the offices are new, their assets under management (AUM) tend to be smaller so the overall average AUM for a Hong Kong family office dropped from US$538 million in 2015 to US$341.7 million last year.
Chinese mainland’s family office development has entered its second phase, with more attention paid to quality of the investment portfolio and team, and they are in the process of developing succession plans.
The Global Family Office Report 2017, by independent research provider Campden Wealth, in partnership with UBS, said the average family office surveyed has AUM of US$921 million, while the average founding family has a net worth of US$1.457 billion. Asia-Pacific family offices manage US$445 million of assets.
Family offices in China are characterized by younger entrepreneurs or the so-called ‘new wealth’, who are more likely to be oriented towards growth than preservation
Enrico Andrea Mattoli, Managing Director of UBS
The fourth annual report says family offices in the mainland, Hong Kong and Taiwan favor real-estate investment, followed by equities and private equity.
Enrico Andrea Mattoli, managing director and head of the global family office for the country at UBS, said: “Family offices in China are characterized by younger entrepreneurs or the so-called ‘new wealth’, who are more likely to be oriented towards growth than preservation, and we expect the pattern of asset allocation favoring equities, private equities and real estate in the region to continue.”
Edith Ang, executive director at UBS, said family offices tend to diversify more on their asset allocation in terms of regions and asset classes.
Asia-Pacific family office allocations favor equities and private equities, according to the report, and there is a significant bounce back in performance driven by continued trend towards illiquid and higher-risk investments in a hunt for yield.
The report said the average investment portfolio bounced back with a notable increase from 0.3 percent to 7 percent last year and Asia-Pacific family offices recorded the second-strongest performance at 6.7 percent last year, driven by equities and private equities, including direct venture capital and private equity, co-investing and private equity funds, which accounted for 20.9 percent of the portfolio. The performance of Hong Kong family offices was 5.9 percent last year and their private equity allocation was 13.7 percent.
Mattoli said real-estate direct investments are generally high in Asia-Pacific family offices at 20.3 percent, with Hong Kong having an even higher allocation at 26 percent, especially towards the residential property sector, due to their conservative investment strategy.
The report surveyed principals and executives in 262 family offices with an average size of $921 million assets under management.