Family Office

Make Room For The Family Office Explosion In Asia - WealthInsight

Chrissy Coleman Asia Correspondent 22 April 2013

Make Room For The Family Office Explosion In Asia - WealthInsight

The increasing affluence of the Asia-Pacific region, coupled with the difficulties of the European and US markets, has led intelligence firm, WealthInsight, to predict the creation of 1000 Asian family offices by 2020.

Family offices – wealth management companies that focus on a single, or a small group of high net worth individuals with readily convertible assets of $1 million - provide a more customised offering of services than traditional wealth managers and private banks, and as such are becoming increasingly popular for those with substantial assets, says the firm's report.

“Indeed, some of the most talented hedge fund managers and executives are leaving their businesses in favour of opening their own family offices,” said the firm in a statement released last week.

As the toughening business environment in North America and the continuing eurozone crisis are limiting opportunities for family offices in those regions, new research released by Timetric, also a data provider, suggests that the increasing wealth in Asia represents the most promising market for family office growth potential.

US and European family offices

At the end of 2012 there were more than 5000 family offices operating globally, the majority of which were based in Europe and the US, accounting for 13 per cent of global wealth management assets under management ($19.3 trillion) and 3.7 per cent of global HNW individual wealth ($66 trillion).

“Although the recent financial crisis had a negative impact on investment returns, family offices in North America were predominantly able to avoid huge losses. However, the tougher rules stemming from the Dodd-Frank act present a challenge to US family offices, making the marketplace less attractive,” WealthInsight said.

In Europe meanwhile, many family offices are now changing the ways in which they manage investment risk and conduct due diligence, according to the report. Furthermore, they are broadening their investments beyond equities and hedge funds by including alternative asset classes such as gold, precious metals and farmland.

Asia

Driven by concerns about the developments in Europe and the US, companies seeking the next growth phase are turning their attention Asia. The region’s rising wealth is creating more millionaires and billionaires than any other region in the world, and WealthInsight predicts that Asia’s 3.3 million HNW individuals will triple to nearly 15.8 million by 2015.

Despite the burgeoning number of HNW individuals in the Asia-Pacific region, there are fewer than 150 family offices operating in the area, excluding Australia. With the predicted explosion of HNW individuals in Asia compounding the fact that China already has the world’s second highest concentration of billionaires and centimillionaires after America, the demand for wealth management in the region will soon far outstrip supply, creating ideal conditions for the growth of new family offices, the report said.

“Consequently, WealthInsight estimates that there will be over 1000 new Asian family offices created by 2020, with Hong Kong and Singapore being the most attractive locations as a result of their favourable economic, social and tax conditions,” the firm said.

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