Asia’s family offices have placed big bets on real assets, making up 27% of the region’s overall portfolio mix, a 1,000 basis points higher than those in North America, EMEA, or Latin America, KKR’s head of global macro & asset allocation Henry McVey and his team found in a recent survey report.
Real estate accounts for 21% of allocation for Asian family money managers while infrastructure takes up less than 1% of their assets under management, the lowest among other regions, according to a 2023 survey of over 75 family office CIOs managing $3 billion in assets, on average, across North America, EMEA, Asia and LATAM.
Family offices’ allocation to real estate in EMEA accounts for 12% while the U.S. and LATAM hold around 11% and 7%, respectively.
“The vast majority of this exposure is coming from real estate. Infrastructure accounts for less than 1% of Asian family offices’ assets under management today, which is amongst the lowest of the regions we surveyed,” said the report, adding that it had increasingly seen a strong intent of these investors, including Asian CIOs, increasing exposure to other real assets, especially infrastructure, in different regions.
For private equity portfolios, Asian family offices are still outranked by those in EMEA, whose allocations are 25%, followed by LATAM. In the report, McVey described European family capital investors as “longer-term focused, with the average European family office underweighting public equities to ’pay‘ for their overweight in private equity.” He also saw an increasing number of European family offices extending holding periods for high-quality positions as part of their private equity programmes.
For 2024, the survey respondents revealed that they intend to increase their allocations to alternatives, ranging from private credit, infrastructure, private equity, commodities and venture capital. Assets with greater volatility, such as cash and public equities are less likely to see huge inflows this year, the survey showed.
CIOs are also looking to allocate to private credit further from the US or Europe in markets, such as Asia, as they see the region becoming more mature for strategies such as private equity, growth capital, and capital solutions, the report noted. These investors are betting on supposed growing opportunities in corporate carve-outs, control deals, and de-leveraging stories, which would lead to better pricing and terms with less competition from established players.
Meanwhile, most respondents acknowledged that they were pivoting away from Greater China and rerouting capital to developed Asia: India and Japan amid the macro uncertainties in the nation. McVey and his team expect China exposure in many family office allocations to fall closer to 2 to 5%, from 9 to 11% previously.
“Our take: sentiment is really negative, and we think investors might want to consider the benefits of a call spread option strategy to maintain some exposure if they are reducing their direct cash exposures to public equities in China at current valuations,” the report suggested.