Asia Pacific family offices optimistic and planning for growth despite concerns over economic uncertainty, geopolitics, and succession, said a report on Tuesday.

Deloitte Private and Raffles Family Office (RFO) said in their “Family Office Insights Series—Asia Pacific Edition” which surveyed 89 single family offices, despite geopolitical instability and uncertain market conditions, Asia Pacific family offices remain optimistic, with 84 percent expecting an increase in the family’s wealth this year and 77 percent expecting to see their assets under management (AUM) rise in 2024.

According to the report, they are also more likely than their global counterparts to scale up their initiatives and gain added expertise, with 48 percent of Asia Pacific-based family offices looking to increase their reliance on outsourcing services, higher than the global average of 34 percent.

The report also showed macro-level risks underline the uncertainties Asia Pacific family offices face, with geopolitics (55 percent) and inflation (44 percent) being perceived as two key market risks in 2024.

Meanwhile, investment risk (72 percent), geopolitics (44 percent), and regulatory and tax challenges (28 percent) are considered to be the top risks to family offices this year, in line with their global peers.

These concerns highlight the importance of investment oversight, which is reflected in the strategic priorities for family offices, with investment risk management being a top priority (67 percent), followed by investment governance and valuation policies (53 percent), and succession planning (38 percent).

Despite recent market volatility and uncertainties, family offices in Asia Pacific have shifted towards more growth-oriented investments (34 percent of respondents).

However, this is coupled with an eye on risk management, with many family offices favoring a balanced investment portfolio.

The top asset classes family offices invested in were equities (25 percent), private equity and private debt/lending (21 percent), real estate (19 percent), and fixed income (19 percent) in 2023, accounting for over four-fifths of the average family office portfolio.

Notably, allocations to public equities, although identical to the global average at 25 percent, had a greater bias toward developing markets, revealing the region’s preference for local markets, such as China and India.

For 2024, the top asset classes family offices are looking to invest more in 2024 are developed (32 percent) and developing (24 percent) market equities, real estate (31 percent), hedge funds (24 percent), and cryptocurrency/digital assets (24 percent).

On average, Asia Pacific-based family offices allocate 32 percent of their portfolio to investments outside their own region.

Currently, North America and Middle East-based investments make up 21 percent and 1 percent of Asia Pacific family offices’ average investment portfolio, respectively.

However, these proportions are expected to increase in 2024, as 23 percent plan to allocate more to North America this year and 21 percent to the Middle East.

Meanwhile, investment levels in Asia Pacific and Europe are expected to remain consistent, with 69 percent and 79 percent, respectively, citing that they intend to keep allocations towards these regions the same in 2024.

Conversely, Asia Pacific has become a popular investment destination for global family offices, with an average of 20 percent of family offices worldwide and 24 percent from Europe planning to expand their portfolios in the region this year.

As a large portion of family offices in Asia Pacific serve first- or second-generation wealth holders, planning for succession is rapidly becoming an important topic, said the report.

Over a third (35 percent) of Next Gens are expected to assume control of the family wealth over the coming decade.

However, a notable 37 percent of families are currently without plans for succession.

As a result, roughly a fifth of family offices (21 percent) have ranked this lack of preparedness as a core risk to their office this year, while over a third (35 percent) are now making succession planning a top 2024 priority.

That said, the road to succession will not come without challenges, as 69 percent of respondents expect a next-generation family member to lead the family office post succession.

However, many cite concerns over Next Gens’ maturity (49 percent), limited qualifications (36 percent), and lack of interest in the activities of the family office (23 percent).

Due to this, a third of Next Gens (33 percent) are making receiving mentoring/training a top priority this year, while another 26 percent are focusing on succession planning.

As part of doing this, Next Gens will be undertaking a variety of roles in the family office this year, including serving as a board member (36 percent), manager/executive (30 percent), or director (21 percent).

At present, only 22 percent of family office heads are non-family professionals, but this number is expected to reach 31% post-succession.

Asia Pacific is leading a broader trend towards professionalizing the family office, with four in ten (43 percent) family offices looking to shift towards more professional and non-family staff this year, substantially higher than the global average of 29 percent.

Family offices in the region are most likely to recruit their professional staff from financial services firms (62 percent), accounting firms (33 percent), and consulting firms (23 percent).

Only 15 percent would opt for professional staff from the family business.

“We are glad to see that Asia Pacific family offices remain optimistic despite global economic and geopolitical uncertainty,

“Beyond risk management, diversified and sustainable investing, and operational technology adoption, leaders are focused on creating robust succession planning strategies to properly equip the next generation and produce a resilient future,” said Yali Yin, Asia Pacific Deloitte Private Leader.

Dr. Rebecca Gooch, Deloitte Private Global Head of Insights, Deloitte Global, noted that there has been a rapid hike in wealth accumulation across Asia Pacific in recent decades and this is spurring the growth of family offices.

As the creators of this wealth step down and cede control to the next generation, she noted families are at risk of losing their wealth if they do not adequately prepare for succession.

“As we are amidst a major generational transition worldwide, trillions of dollars are at stake, and families in Asia Pacific are particularly at risk given their relatively limited experience with largescale multi-generational wealth transference,

“In turn, succession planning is becoming a key topic among the affluent as they ready their next generation to take the reins,” she added.

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