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Banking & Finance

Asia-Pacific's ultra-rich to invest more in private equity

Region's family offices averaged 6.7% returns last year, says UBS survey

SINGAPORE (Nikkei Markets) -- Asia Pacific's family offices, which serve ultra-high-net-worth investors, plan to allocate more money to private equity as they look for growth opportunities in healthcare and education as well as in industries that are being disrupted by technology.

An annual survey by Swiss bank UBS and information provider Campden Wealth showed the region's family offices achieved 6.7% returns on average last year following a poor 2015 when returns were nil. The better performance was due primarily to gains in developed market stock markets and private equity and were roughly in line with the global average.

UBS said 40.2% of Asia-Pacific family offices intend to put more money into private equity, indicating greater flows to the sector in coming months. The family offices were more cautious about equity markets, with 60.6% saying they would maintain their current asset allocation in developed market stocks and 48.6% indicating they planned to do the same in emerging markets.

Speaking at a briefing on Wednesday, Eric Landolt, the head of UBS's family advisory group for the Asia-Pacific, said equities remained the largest asset class for family offices in the region last year, accounting for around 25% of the overall portfolio on average.

Another 20% was invested in physical real estate, while private equity accounted for about 21%.

UBS's definition of private equity includes direct investments in companies as well as money placed with professional fund managers that look at non-public markets.

A total of 42 family offices in the Asia-Pacific with average assets under management of $445 million took part in the UBS and Campden Wealth survey, including 11 from Singapore and nine from Hong Kong.

Looking ahead, UBS said family offices are putting more effort into sustainable and "impact investing," as younger members, in particular those born after 1980, take over wealth management. About three-quarters of Asia-Pacific family offices could see a generational transfer within the next 15 years, according to UBS.

Younger members are "looking at longer-term returns but in a socially responsible manner," said Patricia Quek, a UBS managing director who looks after ultra-high-net-worth individuals and global family offices.

Sectors that have attracted the largest amount of socially responsible investments include healthcare, environmental conservation, education and clean or alternative energy, she said, citing healthcare group Columbia Pacific and Impossible Foods, which is based in the U.S., as companies that had attracted strong interest from UBS clients in the region.

Impossible Foods has developed a plant-based burger that looks and tastes like meat.

Quek said the money for sustainable investments would likely come out of funds that had been allocated to alternative investments, which meant overall portfolios would continue to hold large amounts of traditional investments such as equity and real estate.

--Kevin Lim

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