Inflationary pressures are on the rise with the vast majority of family offices in Asia Pacific citing it as the biggest risk to markets, according to a survey by Raffles Family Office and Campden Wealth.
88 percent of APAC family offices highlighted inflation as the top risk to financial markets, according to Raffles Family Office (RFO) and Campden Wealth’s regional family office report for 2022, marking a 19 percentage point increase from last year. This was closely followed by rising interest rates (72 percent) and geopolitical risk (58 percent).
«As inflationary pressures persist in global markets, interest rates are being forced higher, with US and European economies on the cusp of recession,» said RFO chief executive and co-founder Chi-man Kwan.
«Family offices have started to hedge against inflation, with slightly over half looking for investment opportunities for diversification, and a growing number interested in increasing their allocation in direct investments in private equity.»
Mitigation Strategies
To cope with market headwinds, family offices in the region are increasing exposure to real estate (52 percent), equities (50 percent) and commodities (29 percent), while reducing the duration of bond portfolios (34 percent). 42 percent have also said they have a preference for alternative investments.
«At Raffles Family Office, we have seen an increase in allocation to alternatives – about 20 to 25 percent of assets managed here are in non-traditional products, such as private equity, credit, and real estate,» noted RFO deputy CEO William Chow.
«As diversification begins to gain importance, especially during times of market turmoil, we expect to see this figure continue to increase in the next few years, with family offices looking to generate alpha and achieve optimal risk-adjusted returns in comparison to public assets.»
Sustainability, Crypto
In addition, APAC family offices have also shown interest in some frontier areas including sustainable investing (42 percent) and cryptocurrencies with 52 percent of existing investors seeking to hold the digital asset class despite recent turbulence. On sustainability, family offices are expected to increase investments in green tech, digital transformation, AI, biotech and healthcare.
«This year we have discovered that roughly one-in-four family offices in Asia-Pacific invest in the metaverse, one-in-five in Web 3.0 and one-in-10 in NFTs. These are also areas that family offices plan on allocating more to in 2023,» said Rebecca Gooch, senior director of research at Campden Wealth.
«The Asia-Pacific Family Office Report» is the regional edition of a global report based on statistical analysis of 382 family offices worldwide, including 76 from Asia.
