28 December 2022
A joint report published by Raffles Family Office and Campden Wealth has cast a fascinating light on the thoughts of family offices going forward. The report is based on a survey of 382 family offices worldwide, with 20% situated in the Asia-Pacific region. Focusing on the 76 Asia-Pacific-based family offices that responded to the survey, some interesting trends are emerging.
Asia-Pacific family offices have identified inflation (88%) as the biggest threat to financial markets, a significant increase from the 69% figure in 2021. Interest rates (72%) and geopolitical risk (58%) were also cited as substantial risks in the future. Digging down a little deeper, the most popular investment strategy at the moment is balanced at 42% (compared to 40% in 2021), followed by growth at 30% (compared to 32%), with 28% opting for basic wealth preservation strategies.
While there is much focus on diversification, this is a constantly changing strategy subject to market conditions. Mitigation strategies at the moment are dominated by real estate (52%) and equities (50%), with commodities a distant third at 29%. The recent change in interest rate trends has seen 34% of family offices in the APAC region actively reducingthe duration of bonds in their portfolios. Moving away from the traditional investment markets, many family offices (54%) are actively seeking new investment opportunities, with 42% expressing a preference for alternative investment ideas.
A relatively high 42% of family offices are now looking at forms of sustainable investment, which currently account for an average of 29% of their portfolios. This is a four percentage point increase from last year and slightly higher than the global average of 27%. This figure could increase to 50% over the next five years, with sustainable investments becoming an integral part of the investment world.
In the short to medium-term, family offices are expected to increase their exposure to green technology, digital transformation, artificial intelligence, biotech and healthcare.Despite the volatility in crypto assets, 59% of family offices with exposure are looking to retain their holdings, with 25% looking to increase investment in this area.
Succession plans are a very important part of long term wealth management for family offices. The survey found that 70% of Asia-Pacific family offices already have a succession plan, higher than the 61% global average. Unfortunately, 75% of these plans are relatively casual, with no formal processidentified. There would appear to be a reluctance of family leaders to loosen their grip as they advance in years. Some family offices cited an inexperienced next generation for failing to put formal plans in place.
This survey certainly gives a fascinating insight into how APAC family offices look at markets and even the subject of succession. Feedback shows there is an apparent demand for alternative investment ideas as a means of diversifying away from traditional markets. The survey also highlights the potential challenges facing traditional-style family office clients and a relatively inexperienced younger generation.Back to News