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Nikkei Markets

Asian family offices turning to tech, sustainable investment

Less emphasis on speculative foreign-exchange trading, says UBS

SINGAPORE (Nikkei Markets) -- The growing popularity of family offices in Asia is changing investment habits among the ultra-rich as they seek to preserve wealth for future generations.

The region's richest families are putting increasing sums of money into technology and speculating less on foreign exchange, according to Swiss bank UBS, Asia's largest wealth manager by assets under management.

Led by younger members, such families are also more inclined to invest directly in companies whose products and services have a positive impact on the environment and society, UBS said in its annual report on global family offices.

The comments by UBS come amid a period of massive inter-generational transfers as business founders retire and hand over the reins to younger family members. By using family offices, ownership and control of the assets can be formalized while investment parameters can be spelled out to guide how the wealth is managed over the long term.

Initially formed to preserve and grow the fortunes of a single high net-worth family, family offices have evolved into a more formal business, often employing advisers and managers to manage investable wealth.

In Asia, the growing number of billionaires has swelled the funds they control and the impact of their decisions.

According to the Monetary Authority of Singapore, the number of family offices in Singapore quadrupled between 2016 and 2018. The Financial Times reported last year that private banks expect some 35% of Asian wealth will be handed over to the next generation over the next five to seven years.

While the MAS did not provide an actual figure, UBS estimates there are currently between 250 and 300 large family offices in Asia with hundreds of millions of dollars in assets each. About 60% of these investment offices are based in Hong Kong while the remainder are in Singapore.

UBS's report covered 86 family offices in the Asia Pacific with an average family wealth of $908 million.

Anurag Mahesh, who heads UBS's global family office group in the Asia Pacific, said the growing popularity of formal family office structures has led to changes in the way the region's wealth is managed. For instance, there is greater emphasis on asset allocation and risk management, and portfolios do not change as quickly.

"The propensity to trade and speculate on foreign currency markets purely as a way of trying to make money has...come down...It has become a risk-mitigation tool rather than a risk-assuming tool," he said, when asked about foreign-exchange trading, which was once popular among older private banking clients.

Private equity investments have also become more popular among Asian family offices, he said, with much of the money going into technology and real estate. The technology investments included areas such as healthcare and education where computers and software have changed the way services are delivered, while real-estate investments include new areas such as eco-tourism and shared spaces.

Mahesh added that 40% of Asian family offices are now engaged in sustainability investing, outpacing the rest of the world where the average is 34%.

Currently, more family offices in Asia are concerned about wealth preservation than their peers in Europe and North America, partly due to the risks stemming from the ongoing trade war between the U.S. and China.

--Kevin Lim

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