Asia-Pacific family offices bogged down by escalating costs and plunging Asian equities

Investments in the region are much more expensive.

A report released today by UBS and Campden Wealth Research revealed that Asia-Pacific family offices lag behind their global counterparts due to large holdings of developing-economy equities and fixed income.

These investments were surpassed by the meteoric rise of developed-economy equities. Family offices domiciled in Singapore, Hong Kong, China and Australia also grapple with higher operating costs as a result of a regional focus on costly, growth-oriented investment strategies.

The research surveyed principals and executives in 40 Asia-Pacific family offices with an average size ofUSD 480 million assets under management. In total, participating Asia-Pacific family offices represented manage over USD 20 billion in private wealth.

It revealed that the average Asia-Pacific family office investment portfolio returned an estimated 8% in 2013, with slight deviation across investment strategy and family office size (denoted by assets under management).

A number of family offices reported underperforming relative to their investment benchmark, a first occurrence in three years of UBS/Campden Asia-Pacific family office studies.

Asia-Pacific offices are also focused on growth strategies; outperformance against benchmarks was attributed to significant allocations to direct investments such as real estate and private equity and smaller allocations to capital markets.

Compared to global counterparts, Asia-Pacific family offices are the most active in all forms of co-investment, with almost all offices declaring some type of collaboration with other family offices.

"In Asia, we are seeing more and more families professionalizing their family structures, implementing a governance framework for the family, the enterprise and the management of their assets, some of them by establishing a family office. This is one of the major trends as the second and third generations further assume roles of leadership within the family businesses in the region. We also see them exercising more diversification in their investment portfolio, although Asian family offices are still investing a lot in Asia-Pacific as they are more connected with peers and have a better knowledge of their home markets." said Kathryn Shih, Head of APAC, UBS Wealth Management.

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