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Family offices in Asia: the booming powerhouses of asset management

16 Apr 2024

By Neil Synnott, Chief Commercial Officer, Asia, and Clare Chang, Managing Director, Greater China

Asia is a major driver of global family office growth, with a significant number of the world’s high-net-worth-individuals (HNWIs) residing in the region. Originally designed to manage the wealth of HNWIs, family offices’ role has expanded to encompass strategic investments and influencing corporate governance. Looking ahead, favourable sectoral and macroeconomic trends are expected to fuel their continued growth in 2024 and beyond, with a particular focus on Asia.

Asia’s rise in family offices

The 2023 Global Family Office Compensation Benchmark Report estimates that there are around 20,000 family offices globally today and 9% of the world’s family offices are based in Asia.

While Singapore continues to be a favourable global family office hub in Asia, Hong Kong aims to attract 200 large family offices by 2025.

It’s true that many factors have fostered macroeconomic instability, such as inflation, soaring interest rates and the resurgence of geopolitical tensions. However, there has been a rapid growth, reflecting the region’s economic development and the emergence of a new generation of millionaires. According to Knight Frank’s 2024 Wealth Report, there are over 165,400 ultra-high-net-worth individuals (UHNWIs) living in Asia in 2023, an increase of 2.6% from a year earlier. The current global UHNWI population stands at over 626,600. The report further predicts that this growth rate for Asia – which equates to around 35 new UHNWIs per day – will bring the total number of UHNWIs living in Asia to around 230,000 by 2028, which is almost 40% more than in 2023. At this point, only North America will boast a larger community of ultra-wealthy people, but at current growth rates, it won’t be long before Asia takes the crown.

Asia’s private markets: a favourite among family offices

Moving from services focused on traditional wealth management, family offices have gradually conquered new fields of investment. Real estate, infrastructure, private equity, private debt, taxation, corporate structuring, and transfer, as well as the production of accounting and sustainability reports: family offices are now specialising in a broader range of alternative asset classes and sectors in order to offer holistic investment solutions. The UBS Global Family Office Report 2023 reveals a growing demand for private markets. According to this survey, family offices are actively seeking private equity deals. Asia is characterised by a high proportion of equities (37%) with a clear preference for direct private equity investments (31%). It’s particularly noteworthy that 77% of private equity investments are channelled into technology-oriented companies.

Asset classes like private credit are gaining traction in APAC. Family offices can benefit from attractive risk-adjusted returns offered by private credit, particularly in a scenario where traditional banks are retreating from certain sectors.

Family offices as influential market players

Family offices have long been a silent force in the world of active management, but in recent years they’ve risen to the forefront of financial influence. As the number of ultra-high net worth families seeking more control over their investments grows, the family office model is undergoing a remarkable evolution. As family offices gain a larger share of the investment landscape, their influence on capital allocation and market dynamics is becoming more pronounced. This influence extends to shaping corporate governance, promoting sustainable practices, and steering the direction of industries through strategic investments and partnerships. Family offices in Asia have seen impressive asset growth despite numerous challenges. A 2023 report by Campden Wealth and Raffles Family Office highlights the region’s resilience, as 58% of family offices surveyed reported growth in assets under management (AUM). The same report predicts a significant shift in family office leadership in Asia, with the next generation taking the helm in many cases. This points to a dynamic and evolving landscape for family offices in the region.

Looking ahead: a positive outlook

Family offices are poised to embrace the future with resilience and a commitment to positive change and steady growth driven by several factors, including:

  • Shifting family structures:Financial management decisions are becoming more decentralised within families, leading to a focus on sustainable and responsible investing, as well as investments in local businesses and new technologies
  • Sustainability focus:Over half of family offices have already invested in sustainable assets, with a significant number aiming for fully sustainable portfolios by 2025
  • Geographical diversification: The UBS Global Family Office Report 2023 suggests that when it comes to where they invest, family offices are reviewing their allocations. Family offices plan to broaden out allocations in the Asia region, with almost a third (31%) looking to raise holdings in the wider region outside Greater China. More than a fifth (22%) also plan to raise allocations in Greater China, but overall, it appears that family offices are seeking to diversify their geographical exposure
  • Market normalisation: 2024 should prove more  favourable as markets normalise, with inflation on the way down, even though central banks are likely to maintain a relatively restrictive monetary policy

Why set up your family office in Asia?

Asia’s rise as a wealth hub makes it a compelling destination for family offices. Here are some key reasons:

Booming wealth in Asia: Asia boasts the fastest growing concentration of ultra-high-net-worth individuals (UHNWIs) globally. This translates to a rising demand for wealth management solutions like family offices.

Thriving financial hubs:  Financial centres like Singapore and Hong Kong offer political and economic stability, robust regulatory frameworks, and a highly skilled workforce. These factors create a secure and supportive environment for managing wealth. While family offices in Singapore are showing a growing preference for the variable capital company (VCC) structure, Hong Kong-based family offices prefer the family-owned investment holding vehicles (FIHVs) structure.

Investment opportunities:  Asia presents exciting investment prospects across various sectors, including technology, infrastructure, and real estate. Family offices can tap into this dynamic market for growth.

Proximity to assets:  For families with a significant portion of their wealth concentrated in Asia, having a family office in the region offers geographical convenience and facilitates oversight.

How IQ-EQ can help

IQ-EQ provides a complete range of outsourced back office and middle office services to help manage all challenges associated with family offices. If you’d like to find out more about the support available from IQ-EQ’s expert team, please get in touch.

Working with IQ-EQ has been seamless – you and your team understand our business, advise us appropriately, and handle your side of our collective partnership so that we can focus on making good investment decisions. Evan Gibson SVP, Merchants Capital

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