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Family offices stay vested through market volatility, but appetite remains strong for private equity too

Lim Hui Jie
Lim Hui Jie • 3 min read
Family offices stay vested through market volatility, but appetite remains strong for private equity too
Despite the market sell off in March, family offices have protected themselves from the worst of it by managing to rebalance their portfolios, according to UBS's Global Family Office Report.
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SINGAPORE (July 16): As the world grapples with the COVID-19 pandemic, family offices have not been spared, due to sell-offs in the global market and market dislocations.

However, UBS Global Wealth Management's Global Family Office Report 2020 has revealed family offices have been protecting themselves from the worst effects of the sell-off by rebalancing their portfolios to manage risks.

The survey consists of principals and executives in 121 family offices around the world, and purely comprises single family offices, with an average total family wealth of USD$1.6 billion ($2.2 billion).

More than three quarters (76%) of the respondents said that their portfolios have performed in line with, or above, respective target benchmarks over the year to May.

Over half (55%) of family offices rebalanced their portfolios in March, April and May in order to maintain their long-term allocation.

While 67% of family offices say that their mid-term view hasn’t changed, most are seeking to make tactical changes to their portfolios in response to the macro-economic and market shifts.

According to Anurag Mahesh, who is co-head global family office group APAC, UBS Global Wealth Management, the family offices are very much taking an active approach in manging their wealth, in both looking for upside and minimising the downside.

“Risk management remains a top priority for many of our clients. We see that the family offices across the region continue to focus on their long term objectives, while keeping agile enough to take advantage of opportunities that may arise,” he added.

UBS’s report also reveals 77% of family offices globally invest in private equity, with 69% viewing it as a key driver of returns. It adds almost three quarters (73%) of those investing expect private investments to deliver higher returns than public investments.

Many families also appreciate how investments in private equity is a way they can diversify. According to the UBS survey, more than half, or 52%, invested in private equity so as to be not buffeted by the volatility of stock markets.

In Asia, Mahesh also notes a strong trend amongst Asian family offices to allocate their investments to private markets and direct investments over the years.

“Given the strong preference of Asian families for private markets and given their entrepreneurial roots, this doesn’t come as a surprise to us,” he said.

But he added many Asian GFO clients prefer direct investments as they offer greater control, and that many family businesses also value private equity diversification properties.

Reflecting the business backgrounds of many families, almost three quarters (71%) of family offices investing in private equity focus on expansion or growth equity. As many have spent their lives building businesses, this is an extension of their careers.

The report adds venture capital is also a common investment, with more than half (53%) normally investing in this area.

In line with many families’ growth bias, information technology (77%) and healthcare (60%) are the preferred sectors for investing. But family offices usually diversify their investments across four to five sectors such as information technology; healthcare; real estate; consumer discretionary and communication services.

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