The family office is still a new concept in China despite the massive wealth being generated very quickly, according to a UBS report on billionaires and their family wealth.
Some rich families who have a wealth of more than US$15 million, several households and generations may establish a single family office structure to handle major family assets and core holdings like consolidated accounting, tax and estate. Investment professionals are employed by the families to manage the family office.
In China, the family office market space is growing but is “still relatively small when you look at the proportion of wealth holders and the number of offices”, said Dominic Samuelson, chief executive of Campden Wealth Research which jointly produced the report with UBS.
The shape and style of family offices in China are proving to be slightly different to the global model, said Samuelson.
“At the moment, they are predominantly more trading related. Secondly, they are being used as vehicles or platforms for engaging the next generation,” he said.
The research also found that wealthy families in Asia-Pacific tend to interfere more in managing their family offices compared with their world counterparts.
But the greater influence is found to have incurred higher operating cost and result in worse investment performance.
“Sometimes beneficial owners who get their own family offices have been very successful persons in their chosen field of business, and that expertise may not be able to translate to the investment field,” said Enrico Mattoli, UBS’ managing director and head of investment products and services of ultra high net worth in Asia-Pacific.
Samuelson said that in a regional context, the family office concept is still quite new in Asia-Pacific, so the level of sophistication has not yet developed.
“At present, in Asia-Pacific, there is still lot of beneficiary participation… but a great operator does not necessarily make a great investor. In North America, a lot of beneficiaries step away and have professionals to run the office,” he said.
The average family office under management versus total family net worth is 58 percent for Asia-Pacific while the global average is 70 percent.
The Global Family Office Report 2014 surveyed 205 family offices with an average of US$890 million in assets under management around the world.
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