Citing signals of economic transition and diversified benefits, Amundi recommends a significant portfolio allocation to gold following its +30 per cent surge since 2023. Investor Strategy News
Australia’s biggest super funds disagree on what the new Your Future, Your Super performance test should look like, but they both think the consequences for failure should be just as weighty – and apply to everybody equally.
APAC Family offices lean into real estate, private debt
Family offices in Asia Pacific, including Australia and New Zealand, have higher exposures to emerging markets, in both equities and bonds, and to private markets than their European and North American counterparts.
And they are favouring real estate and private debt for increases in future allocations, according to the 10th annual survey of big single and multi-family offices by global researcher Campden Wealth in association with the Raffles family office.
The Asia Pacific Family Office Report 2023 offers details of investment asset allocation and returns as well as trends in other important concerns for family members, such as operational costs, governance, succession planning, communications and philanthropy.
Adam Ratner, Campden Wealth’s director of research, says, for instance, that after investment management risk, the two highest priorities for family members are eldercare and communications. Ratner, an Australian, held several senior marketing and communications roles in Australian wealth management before taking up his UK-based role at Campden Wealth in March this year.
He said: “To address these challenges, implementing formal governance structures like a family council and constitution could prove instrumental, reinforcing communication channels and promoting a more cohesive approach among family members.”
Of the 76 single and ‘private’ multi-family offices surveyed from APAC, 14 are Australian and two from New Zealand. A total of 330 family offices were surveyed worldwide. The APAC family offices had total assets of US$41 billion (A$62 billion), for an average asset size of US$500 million. Across all three regions covered in the global report, the total was US$269 billion, with an average size per family office of US$900 million.
APAC families tended to be a little more growth orientated in their investment allocations than the other regions and were particularly focused on real estate for future allocations. Probably because they are smaller, their costs tend to be higher, on average, than north American and European families.
They have slightly less focus, however, on sustainability for their indirect investments. Only 43 per cent of APAC families “are engaged in sustainable investing”, the report says, compared with 50 per cent globally. And their rate of adoption of such strategies has slowed. In terms of investing in sustainable funds or strategies, the most popular is thematic.
A big difference between APAC families and their North American and European counterparts is in private markets. APAC families have a strong preference for direct, internally managed, private equity and venture investing. This has presented them with the same sort of challenges that Australian super funds have met in recent years with their internalisation programs.
Apart from real estate, the main asset sub-classes attracting APAC family offices’ direct internally managed private-market investments have been fintech and climate mitigation technologies. But AI is attracting the highest proportion of new investment funding at the moment.
For future investments overall, 39 per cent intend to increase their allocations to real estate, followed by 32 per cent for private debt. In terms of overall current allocations, the biggest allocation remains developed markets equities (17 per cent, compared with 22 per cent for North American and European families), followed by real estate with 15 per cent (18 per cent for the others).
Real estate and private equity funds provided the best returns for the APAC families last year (2022), both with 8 per cent.
The report notes, however: “The more intriguing aspect is how much better Asia-Pacific family offices performed in comparison to market indices and their global peer group. For instance, developed market equities, which predominantly reflect the U.S. stock market indices, returned a positive four percent, in contrast to the negative return from the S&P 500.”
A total of 58 per cent reported an increase in assets under management over the past 12 months, and about one-third achieved growth of more than 10 per cent. Assets under management fell for 18 per cent of the respondents.
Tactically, APAC family offices employed a range of strategies to counter the impact of inflations and rising interest rates, the report says. These include shortening the duration of fixed-income bond portfolios, reducing borrowings, and increasing exposure to equities.
In other investment trends, artificial intelligence stands out as the most sought-after new technology. A net 32 per cent of family offices are actively looking to increase their engagement in AI, and an additional 39 per cent are planning to initiate an exposure, the report says.
Climate change mitigation (32 per cent), fintech (32 per cent) and healthcare (26 per cent) remain popular for new investment in technology.
Family offices in APAC tended to be younger than those in the other two regions, with only 15 per cent having their ‘next generation’ in control But, over the next five years, this figure is expected to increase to 47 per cent and over 10 years to 71 per cent.
Slightly fewer than half of the respondent feel that their next generation is sufficiently prepared for the task and about half believe that their family offices are not very effective at preventing conflicts between family members.
