Family offices (FOs) in Asia Pacific are looking to up their stakes in equities, private debt, and real estate amid mounting macroeconomic uncertainty and the need to mitigate volatility, according to a study.
The 76 single and private multi-FOs surveyed in the region, for The Asia-Pacific Family Office Report 2023 by Campden Wealth and Raffles Family Office, said that prioritising strategies that can hedge against inflation risk overshadowed other needs this year, such as pursuing new investment opportunities or portfolio diversification.
Private debt has gained a lot of traction this year as an alternate route to doing deals with rising interest rates, while real estate is seen as an effective hedge against inflation. FOs also intended to increase their allocation to equities in developed markets despite a lacklustre public market.
Private asset classes such as venture capital are seeing one of the largest pullbacks, aside from crypto and digital asset investments, with FOs looking to decrease their investment allocations by 17%.
Direct private equity (PE) investments are proving more popular than PE funds. FOs had plans to increase the former by 31% and the latter by 26%. But as part of mitigating inflation and rising interest rates, they were also looking to reduce the commitment of new money into private equity altogether.
Despite market drawdowns, a large number of Asia Pacific’s FOs also reported that their assets under management (AUM) were growing — 58% reported an increase in their AUM and 32% saw an increase worth more than 10%.
A large chunk of their geographic focus remained in the Asia-Pacific region, making up for just less than 60% of their AUMs. China’s share is surprisingly relatively low, as Asia’s largest economy, it contributes to just 5% of total AUM.
The country has been grappling with a weakening economy, property crisis, and intensifying geopolitical tensions with the US. FOs are expected to continue focusing on Asia Pacific ex-China, the report said.
An artificial intelligence (AI) boom that has seen companies hit valuations at staggering levels made it the most sought-after new technology from an investment perspective, with a net 32% of FOs seeking to increase their involvement and 39% planning to initiate an exposure.
Healthcare investments, including biopharma, were popular sectors for new investments in technology, along with climate change mitigation and fintech.