Family offices that provide tailored advice to super-rich families are on the rise in Asia. A recent high-profile example is Alibaba executive vice chairman Joseph Tsai's Blue Pool Capital, which manages the wealth of his family and other Alibaba founders.
According to a source familiar with the matter, Tsai's vision is to build a professionally-run investment programme for a few select families and their charitable activities. The Hong Kong-based family office is co-managed by Alexander West and Oliver Weisberg, a former Citadel managing director.
Setting up a family office has certain advantages, such as increased confidentiality and a more personalised approach to managing funds. Consultants and bankers expect more rich families to hop on the bandwagon.
"While the sector is still small relative to private banks and wealth managers and relative to outside of Asia, we expect more growth in this area as more wealth is created in Asia," Nam Soon Liew, EY managing partner, financial services, Asean, told FinanceAsia.
Based on published data there are about 3,000 single-family offices globally, which together manage $1.2 trillion-worth of assets. At least half were set up in the last 15 years and only about 100, or 3%, are in the Asia-Pacific region.
But such meagre Asian representation looks set to change.
As wealth creation has shifted from the US and Europe to Asia, this has supported the growth of family offices in Asia. “Across Asia, particularly in North Asia, it has been a second gilded age, similar to what happened in the late 19th century and early 20th in the US and Europe, when the first wave of family offices was set up,” Eric Landolt, head of family advisory Asia Pacific at UBS Wealth Management told FinanceAsia.
In recent times, much of the wealth has come from the technology sector, with the likes of Alibaba going public. “Since the 1990s and 2000s, a tremendous amount of wealth has been created in Asia due to innovation and technological shifts. This wealth needs to be managed," Landolt said.
A number of private banks have dedicated teams to help clients set up family offices. Most teams remain lean though they get broader support from other people within the bank.
Landolt, who is based in Singapore, heads a team of three to four people and is looking to increase his headcount to meet growing demand. "We see a growing need for advice to help set up family offices across Asia and want to expand the team across Asia to meet greater demand from clients," Landolt said. "We are looking at doubling the team within the next 12 months."
Potential disintermediation
While private banks can play a role to advise wealthy clients that choose to set up family offices, they are also becoming a step removed from rich clients.
"[Family offices] are in a position to disintermediate the private banks by being the ones who are in direct contact with the client managing the wealth," EY's Liew told FinanceAsia.
Some private bankers argue that the relationship can be a complementary one, however. Bernard Fung, head of family office services and philanthropy advisory, Asia Pacific, at Credit Suisse Private Banking & Wealth Management, was previously chief executive officer of Innotech Advisers, a London-based single family office and investment vehicle for Lord Sainsbury of Turville, the British retail magnate. He told FinanceAsia that it is difficult for a family office to exist without relationships and support from banks.
“I ran a family office in London for the better part of a decade...We had very good relationships with certain financial institutions, banks and asset managers," Fung said. "The most important part to understand is that the family office itself can exist in a very productive way with the financial eco-system.”
"If you want to manage your own assets outside the financial system, you could do that, if you had enough resources. But actually in practice, it becomes prohibitively expensive," Fung added.
Fung said that Credit Suisse has a history of working with sophisticated investors and would be keen to work with the likes of Tsai's family office. "If we are good enough to be at the table to propose to him something, [then] yes obviously," he said.
Since Credit Suisse started its family office and philanthropy advisory services in Asia in 2011, Fung has seen growing demand from clients.
"The number of families that are approaching us to set up family offices has doubled every year since we started," said Fung, who heads a team of six people, of which three are dedicated to family offices.
Fung told FinanceAsia that he is also looking to expand his team. "We will grow headcount based on demand," he said.
