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Another core driver of this exciting evolution is the greater weight and intensity of both global and local regulation
and the ubiquitous compliance oversight the world's authorities are conducting. Wealth management experts in Asia
regularly recount how the very wealthy families today worry far less about tax mitigation than about assembling the
right structures for family asset preservation, regulatory transparency and to achieve whatever legitimate privacy they
can in a world of increasing disclosure.
The wealth management industry and their clients are all acutely aware of the increasing focus on, and often
investigation of, wealthy individuals and families. In a globalised world, multi-jurisdictional regulatory considerations
must, therefore, be taken increasingly into account.
Family offices are increasingly seen as ideal vehicles through which to help manage this immense complexity of holding
such huge wealth, often across those multiple jurisdictions, and doing so as privately as possible.
UHNW families have therefore been consolidating their worldwide financial affairs and establishing an overall investment
strategy that can help to minimise risk and enhance data management, security, privacy, detailed reporting and overall
transparency both within the families and externally as required by the authorities.
Another core trend that the family office is helping facilitate is the shift from publicly marketable capital market assets
to private, less liquid, investments. There is indeed a well-documented trend towards family offices investing more in
alternatives as well as sustainable and ESG investing, an initiative favoured by the Millennial generation, for example.
The asset types might include direct private equity, co-investing, venture capital, hedge funds, and real assets. This all
provides diversification as well as, possibly, enhanced returns, and away from potentially volatile public markets.
In their Global Family Office Report 2019, UBS/Campden Research highlighted how important alternative assets/
investments are today. They reported for example that private equity fared the best of all asset classes for family
offices, achieving an average return of 16 percent for direct investments and 11 percent for funds-based investing. And
the report showed how real estate achieved a 9.4 percent return, and the family offices increased their holdings in that
asset class to 17 percent of the average portfolio.
Those figures compared with average investment returns of 5.4 percent for the same 12-month period, with developed
market equities achieving only 2.1 percent. Additionally, the report indicated that one-third of family offices are involved
in sustainable investing of some form.
The family office is helping families to achieve this type of diversity. By pooling all of the family wealth through one
family office vehicle, the families will often have access to larger and more complex investments than if family members
had each invested alone. For example, access to the cream of the world of private investments often these days means a
single investment of USD30 million or sometimes significantly more. And to obtain access to some of the world's leading
commercial real estate projects, again size matters.
Additionally, for many families, especially those where the founder patriarch or matriarch is very old, or indeed where
one of them has already passed away, there is a well-documented inclination towards philanthropic and social legacy
investments that elevate the family name and heritage well beyond the pursuit of, or preservation of their wealth.
Again, the family office can serve as the conduit and enabler for such initiatives.
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