Single family offices in Asia are doing better than their Europe, Middle East peers in 2022: Credit Suisse

Many high-profile individuals have set up their family offices in Singapore. ST PHOTO: LIM YAOHUI

SINGAPORE - Single family offices (SFOs) in Asia have outperformed their European and Middle Eastern counterparts in the first seven months of this year, Credit Suisse's inaugural Single Family Office Index has found.

The SFO Index, which was released on Monday, tracked the financial asset performance of 312 SFOs across three regions - Asia-Pacific, Europe and the Middle East - from January 2020, the onset of the Covid-19 pandemic, to July 29, 2022.

Sixty per cent of the SFOs covered in the index came from the Asia-Pacific region, while the remaining 40 per cent came from Europe and the Middle East.

Singapore is one of the key wealth management hubs in the Asia-Pacific and many high-profile individuals have set up their family offices here.

They include the billionaire founder of hedge fund Bridgewater Associates Ray Dalio and Mr James Dyson, who founded vacuum cleaning giant Dyson.

Mr Dyson set up his family office in Singapore in 2019.

The Monetary Authority of Singapore estimated there were about 400 SFOs here as at end-2020, but the number had jumped to 700 by the end of 2021.

Mr Andrew Chan, partner of Lioner International Group, which offers insurance, trust and family office advisory services, said SFOs like Singapore because it has the financial services and support structures in place for the planning, setting up and management of the family office.

Mr Chan added that Singapore has the talent to run and operate family offices - such as professional accountants, lawyers, bankers, investment managers and wealth and insurance planning specialists.

Family offices here and in the rest of Asia-Pacific have performed relatively better than their peers in Europe and the Middle East since the beginning of 2022.

According to the SFO Index, all three regions experienced declining performance, but the drop in Asia was of a smaller magnitude compared with what was seen in Europe and the Middle East.

The Asia SFO Index fell by 6.6 per cent. Europe and the Middle East saw greater decline, with Europe down by 8.1 per cent and the Middle East down by 11.8 per cent.

Ms Nannette Hechler-Fayd'herbe, Credit Suisse's head of global economics and research, said that Asia outperforming other regions is likely because many of its family offices have smaller exposure to equities.

Credit Suisse found that Asian SFOs allocated 44.93 per cent to equities.

In contrast, SFOs in Europe and the Middle East hold relatively more listed equities, with the former holding 49.6 per cent and the latter 53.7 per cent.

Credit Suisse said equities fell by 6.5 per cent in the first seven months of the year, compared with other asset classes such as bonds, which fell 1.6 per cent, and alternative investments such as hedge funds, private equity, commodities and real estate, which were up 0.7 per cent collectively.

The weak performance of equities also hit large SFOs - which have more than US$500 million (S$718 million) of assets under management - harder than their smaller and medium-sized peers.

Credit Suisse said large SFOs hold relatively more listed equities (62 per cent) compared with their smaller counterparts (45 per cent).

It added that during the survey period, it noticed this trend of rising exposure to equities and alternative investment and reduction in fixed income exposure.

Ms Hechler-Fayd'herbe said the average asset allocation is 47 per cent in equities, 29 per cent in bonds, 17 per cent in alternative investments and the rest in multi-asset investment.

She thinks that with interest rates rising, SFOs may take a look at bonds again in the next 12 months.

Credit Suisse also launched the second annual edition of its SFO survey report on Monday, with 116 respondents from 50 countries across Europe, Latin America, the Middle East and Asia taking part.

Mr Thomas Ang, Credit Suisse's global head of family office services, said the survey showed that SFOs are shifting their investment strategy to preserving rather than growing wealth as inflation threatens to erode the value of their assets.

The survey also found that SFOs continue to grapple with managing generational conflict and ensuring the smooth transfer of wealth to the younger generation.

According to Wealth-X, a research firm specialising in high-net-worth individuals, nearly US$3 trillion in the Asia-Pacific will be in the hands of the next generation in years to come.

Mr Chan said Asia's younger generation are allocating their family wealth into causes that resonate with their personal lifestyle and values.

"We are seeing environmental, social and governance related funds and projects gain popularity with the SFOs in the city," Mr Chan added.

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