Asia-Pacific Family Offices and Philanthropy

PT3The Global Family Office Report 2014 by Campden Wealth and UBS offers the first comprehensive study of family offices worldwide. The section on philanthropy involvement and practices in the Asia Pacific region caught our attention.

Globally, the survey found far more similarities than differences, with offices focusing on similar objectives as well as investment and management strategies. Broadly speaking, the study found that offices focusing on growth-based strategies performed better against investment benchmarks, but also spent more overall and outsourced less. Those offices with the highest degrees of family involvement performed the worst regardless of investment strategy.

In addition to general findings, the report also provided information on the four specific regions. The Asia-Pacific family offices surveyed manage USD 480 million out of USD 830 million in total family net worth. These offices are still developing governance structures and other required infrastructures, which may be in part because 76% of these offices have formed since 2001.

Investment portfolios for Asia-Pacific offices do differ from other surveyed regions with a greater emphasis on fixed income, direct venture capital/private equity, and co-investing than other regions. These differences, combined with the focus on longer-term investments, may account for the under-performance of these offices relative to their North American and European counterparts found in the study.

Asia-Pacific family offices might serve as the prime example of the new model of the family office: staffed by professionals working in partnership with family principals and beneficiaries; nurturing business and finance relationships; providing few family lifestyle services; focused on intergenerational wealth management and impact-focused philanthropic initiatives.

Asia-Pacific offices more often provided in-house management of all investments, resulting in significant staff time allocation and the highest operating costs. However, these office are participating in the global trend toward outsourcing specialized services. Asia-Pacific offices also had the shortest investment horizons with 90% of surveyed offices maintaining an investment horizon of less than ten years.

Relationships are critical to Asia-Pacific offices as they reported the highest levels of collaboration with other family offices and a strong focus on co-investment. These co-investments occur on a global (25%), regional (42%), and local (33%) levels.

Family beneficiaries are more likely to be involved in Asia-Pacific offices, not only in investment planning, but notably in their engagement with philanthropy, often taking strategic roles. One of the challenges facing Asia-Pacific family offices is an aversion to dealing with succession planning and developing effective governance models on par with other global offices. However, a significant increase in philanthropic involvement in Asia-Pacific offices since 2013 (10%) may indicate an effort to involve younger generations in the activities and operation of the office, subtly preparing them for succession.

77% of family offices in the Asia-Pacific region reported some form of philanthropic engagement.

In the area of philanthropy, education is the most supported cause globally, with youth initiatives and health following. Asia-Pacific offices showed the smallest average philanthropic endowment overall, but were among the highest in having a clear strategy and focus to their philanthropic engagement. One-third of Asia-Pacific family offices have endowments of at least USD 15 million and 10% of these offices reported endowments greater than USD 50 million. These offices were also very unlikely to outsource their philanthropic efforts to specialists.