PE exposure helps Asian family offices outperform peers - survey

The 2018 Global Family Office Report, released by UBS and Campden Research, found that the average family office portfolio in Asia Pacific delivered a return of 16.4%. This compares to 15.9% for North America, 15% for Europe, and 14.7% for the rest of the world.

While the Asian contingent – which accounted for 17% of overall respondents – had the lowest allocation to private equity funds (4.9%), it had the highest exposure to direct PE investments (15%) and emerging market equities (14%). It also ranked first for cash (12%) and second for direct real estate investment (18%).

When the average private equity portfolio is broken down by segment, it emerges that Asian family offices have a relatively high allocation to venture (72%, against an overall average of 57%) and the lowest allocation to buyouts (39%; the average is 54%). They also have noticeably less exposure to private debt and special situations than their global peers.

The total average return for family offices globally was 15.5%, up from 7% in 2016 and 0.3% in 2015. “The performance was driven by family offices shifting further into equities, both public and private. Real estate direct investments remain the third most popular asset class, while hedge fund allocations have fallen once again,” the report noted.

Private equity, including direct and fund commitments, accounted for 22% of the average global family office portfolio in 2017 – a 3.8 percentage point increase on the previous year – and generated a return of 18%. The return on the asset class in 2016 was 13%. Alternatives as a whole make up nearly half of the average portfolio.

There has also been a jump in the number of groups engaging in impact investing, with over half of respondents planning to increase allocations over the next 12 months. Private equity is the most commonly used channel for commitments in this area.

Although Asia Pacific family offices may have outperformed their peers, they have done so with the highest cost base. The average family office globally expected to spend $11.4 million on services in 2018, including $6.7 million in operational costs and $4.7 million in performance and administration fees for external managers.

Costs account for 126 basis points of assets under management in Asia, compared to 113 basis points in North America. Operating costs are the key differentiator.

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• Topics
• LPs
• Performance
• Fundraising
• Family office
• Asia