Family offices to mix caution with courage in 2022

John McLean, a managing director and head of global asset managers Asia Pacific at Citi, who spoke as part of a panel representing family offices, flagged pending interest rate hikes as among the most likely market disruptors in the coming year.

This concern is tempered, however, by expectations that China’s latest regulatory crackdowns and recent pandemic-related pressures on international logistics will prove short-lived phenomena.

“We see that that trend [less capital flowing into China] has well and truly troughed and maybe moving back the other way within a 12-month window. Sure, there’s a desire on the part of the market to see a little bit more certainty there, but we’re talking within 6-12 month timeframes, not 3-5 year timeframes,” McLean said.

“I think supply chain-induced challenges exist around some consumer sectors. Although it does appear that Omicron will be a phenomenon everywhere, we hope that it will pass quite quickly, and we’ll see those supply chain blockages unblock very quickly. You can see some quite sharp, short rotations in different sectors.”

Patrick Tsang, CEO of Chow Tai Fook Enterprises, and Tony Yeung, CEO of Peterson Group, agreed that investors should avoid valuing assets based on the frequently used comparables and underwriting metrics of recent years. Both family offices are active across private asset classes.

Yeung, whose family established Peterson Group in 1959, said travel restrictions in Hong Kong were making it difficult to maintain a global portfolio and access talent. Nevertheless, the plan is to continue pressing for more non-Asia exposure, eschewing Europe for North America, which is seen as a more cohesive regulatory environment in terms of COVID-19 restrictions.

Chow Tai Fook Enterprises, controlled by Hong Kong’s Cheng family, owners of the eponymous jewellery chain, plans to target opportunities this year across upstream mobility tech, healthcare, and special situations. There is also significant interest in cleantech, including hydrogen energy.

“In the past couple of years, we’ve seen some very aggressive valuations, aggressive methodologies in terms of beating your competition, winning market share, and we are beginning to see cracks in those industries,” Tsang said.

“Just burning cash and giving lots of rebates may or may not be the way to go. The super-aggressive competitive strategies may not work. Sometimes the more realistic goals we need to think about.”

Anthony Chan, CEO of Isola Capital Group, emphasised the need for diversification but noted that his firm was pulling back from smaller markets where it did not have access to partners on the ground. Isola, a multi-family platform, plans to establish more relationships with GPs in large geographies with a tech-focused strategy. This includes building out an in-house blockchain team.

“Historically, some people might think it’s conservative to be more focused on a core portfolio and even fixed income, even though it hasn’t generated much return for years. I think we live in a world now where you have to be diversified across asset classes, strategies, vintages if you have a program to deploy across certain major currencies, and just have good geographic separation,” Chan said.

“We live in a world where very clearly there’s the US or North American side, and there’s the China side, particularly for technology-driven sectors.”

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• Topics
• Greater China
• LPs
• Hong Kong (China)
• HKVCA
• Citigroup
• covid-19
• Economy