In the realm of risk appetite,
Asia's family offices, which historically displayed a greater willingness for
risk compared to their global counterparts, may be undergoing a transformation,
as indicated by a recent survey.
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| Singapore city skyline |
Conducted by Citi Private Bank in
the third quarter of the year, the global survey reveals a trend of shifting
away from cash and toward risk assets among family offices worldwide. However,
an interesting exception emerges in Asia.
Defined as private wealth management advisory firms catering to high net worth individuals, family offices were the focus of Citi's survey. The surveyed family office clients, boasting a combined net worth of $565 billion and representing diverse global locations (with two-thirds hailing from outside North America), provide a unique perspective on financial trends.
What distinguishes family offices
from traditional wealth managers is their exclusive focus on delivering
services to affluent individuals or families.
In the initial half of the year,
Asian family offices demonstrated a pronounced inclination toward allocating a
larger portion of their funds to risky assets over low-risk ones, as
highlighted by Hannes Hofmann from Citi Private Bank during a late November
interview on CNBC's Squawk Box Asia.
Hofmann noted that given this
existing high exposure to risk, Asian family offices face challenges in further
increasing their risk positions at this juncture. According to Citi's data,
approximately 44% of assets held by Asian family offices were invested in
private and public equity, in stark contrast to the 30% to 33% allocated to
cash and fixed income.
This disparity in asset allocation between risky and conservative investments is notably more substantial in Asian family offices when compared to their counterparts in the U.S., Europe, or Latin America.
Craving the Thrill of Risk-Taking
Asian family offices have exhibited
a notably large risk appetite for several reasons, one of which is the
historically low interest rate environment. Additionally, these offices made
bets on China's post-Covid recovery, although this optimism has waned over
time.
Citi's observations indicate that
the potential slowdown in China, coupled with disruptions in supply chains, has
exerted a significant influence on the portfolio allocation decisions of Asian
family offices.
Another contributing factor is the decline in equity markets across Asia throughout the year, presenting a stark contrast to the relatively more resilient markets in the U.S. and Europe. These multifaceted dynamics collectively contribute to the distinct risk landscape and investment strategies adopted by Asian family offices.
Hong Kong's Hang Seng index has
experienced a significant downturn of approximately 15% year-to-date,
paralleled by mainland China's CSI 300, which has seen a decline of over 13%
over the same period. Notably, both indices stand out as the poorest performers
among major Asian stock gauges in the current year.
In contrast, Wall Street's benchmark S&P 500 index has demonstrated a robust rally, surging by 23% over the course of the year. Similarly, Europe's Stoxx 600 has also shown positive momentum, registering a gain of more than 12%. These disparities underscore the divergent performance trajectories of global stock markets, with Asian markets facing notable challenges in comparison to their counterparts in the U.S. and Europe.
Singapore stands out as a Gleaming point of Optimism
Globally, Asia hosts 9% of the
world's family offices, as reported by KPMG Private Enterprise and family
office consultancy Agreus.
Within Asia, Singapore emerges as
the leading hub for family offices worldwide, hosting approximately 59% of them
as of 2023, according to the report. Hong Kong follows with around 14%, India
with 13%, and the remainder distributed among countries such as Malaysia,
Thailand, and Pakistan, according to Agreus. This distribution highlights the
concentration of family offices in key Asian financial centers, with Singapore
playing a prominent role in this landscape.
Singapore's proactive regulatory approach and favorable tax rates have positioned it as a preferred choice among the affluent. The island nation not only attracts the wealthy due to its regulatory environment but also serves as a strategic hub for accessing diverse investment opportunities across Asia, contributing to the broader goal of portfolio diversification.
Tayyab Mohamed, co-founder of
Agreus, emphasized the proactive stance of the Monetary Authority of Singapore
(MAS), the country's central bank and financial regulator. He noted that MAS
has actively marketed Singapore as an ideal destination, successfully drawing
family offices from around the globe to establish their presence in the
city-state. This approach aligns with Singapore's efforts to cultivate itself
as a leading center for family offices and wealth management on the global
stage.
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