Apac family offices optimistic despite macro uncertainty, succession plan urgency

FAMILY offices in the Asia-Pacific (Apac) expect growth in both their family wealth and assets under management (AUM) despite geopolitical instability and uncertain market conditions, based on a report jointly released by Deloitte Private and Raffles Family Office on Tuesday (Sep 10).

Among the 89 single family offices surveyed in the region, 84 per cent foresee an increase in family wealth, while 77 per cent expect growth in AUM in 2024.

These family offices’ average AUM stood at US$1 billion, and wealth averaged US$2.1 billion. 

The confidence in growth is despite a lack of a succession plan among 37 per cent of the Apac family offices surveyed, while 35 per cent expect to undergo generational transition over the coming decade.

Roughly a fifth of the family offices have ranked this lack of preparedness as a core risk to their offices this year, while more than a third are making succession planning a top 2024 priority.

Dr Rebecca Gooch, Deloitte Private’s global head of insights, noted that families might lose their wealth if they do not adequately prepare for succession.

“There has been a rapid hike in wealth accumulation across Apac in recent decades, and this is spurring the growth of family offices,” she said. She added that Apac families are particularly at risk, given their relatively limited experience with large-scale multi-generational wealth transference.

Macro uncertainties remain the family offices’ top market concerns. More than half of them highlighted geopolitics as a key risk, and 44 per cent noted inflation as one.

In line with their global peers, families in Apac perceived investment risk, geopolitics, as well as regulatory and tax challenges as top risks to family offices in 2024.

These concerns are reflected in their strategic priorities, with investment risk management being a top priority, followed by investment governance and valuation policies.

“In recent years, family offices in Apac have leaned towards a more conservative investment strategy, maintaining a balance between wealth preservation and growth,” the report noted.

The top asset classes family offices invested in were equities (25 per cent), private equity and direct lending (21 per cent), real estate (19 per cent) and fixed income (19 per cent) in 2023, accounting for more than four-fifths of the average family-office portfolio.

The top asset classes they plan to increase their allocations in this year are developed market equities (32 per cent) and real estate (31 per cent).

Some 24 per cent of the families indicated wanting to increase allocation to hedge funds in the year, underpinning their confidence in hedge funds’ ability to “offer less market-correlated returns and benefit from the elevated volatility in various markets”, based on the report.  

While more than half of the respondents plan to maintain their cash positions, 32 per cent indicated reducing their exposure to cash, cautiously moving away from a watch-and-wait approach of the past few years to pursue promising investments.

William Chow, deputy group chief executive of Raffles Family Office, noted that as rate-cut momentum gains, Apac family offices are balancing risk awareness with a renewed focus on equities.

“Strategic portfolio diversification continues to enable Apac family offices to mitigate risk, enhance stability and capture opportunities for growth,” he added.