Cross cultural convergence

Cross cultural convergence

Category: Asia, China, Global
By Derek Au

Asian family offices are now working with their Western counterparts in exploiting regional demand

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Asia-Pacific as a region continues to see extraordinary growth of both its high-net-worth population and the wealth they are accumulating. Both are being driven by the region’s ongoing vigorous economic momentum. And in China, where the government has eagerly nurtured start-ups as a way to fuel the flagging economy, those shrewd entrepreneurs who made the right bet could confidently expect their core businesses to mushroom. This, in time, has become the foundation of the now significant numbers of newly-rich in the country.

More broadly, however, this development in China has had a direct influence on Asia’s aggregate population of wealthy people. According to the World Wealth Report 2015 released by Capgemini and RBC Wealth Management, Asia Pacific now leads the global growth rate in terms of both the number and actual wealth of its high-net-worth individuals (HNWIs), which are defined as those having investable assets of at least $1 million; their number expanded by 8.5% last year, while their collective net worth did even better, growing by 11.4%. In value this amounted to $15.8 trillion. Assuming this continues, they will assume pride of place relative to their global peers by the end of this year, the report predicts. Moreover, Asia-Pacific has surpassed North America as the home of the largest HNWI population, with 4.69 million last year.

Not surprisingly, this wealth creation in Asia-Pacific has drawn a lot of attention from western institutions, including family offices seeking to tap into the possibilities it implies. Among these is Oracle Capital Group, a London-based multi-family office now serving clients from emerging markets, including those in Southeast Asia.

Martin Graham, the group’s chairman, tells Asia Asset Management that they plan to set up an office in China over the next 18 months, the idea being to back their Chinese partner Shanghai International Trust, a major asset manager for the country’s well-to-do. The two firms signed a partnership agreement in March, one expected outcome of which is helping Oracle Capital expand into the Mainland.

Under the agreement, the parties will work together on fund management activities pertaining to Chinese investors. This includes launching and managing private equity investment funds for wealthy individuals along with institutional clients. Oracle Capital will also assist its Shanghai partner in developing family office solutions, including wealth consultancy and bespoke advisory services.

“In essence, they are bringing the clients and we are bringing our products,” Mr. Graham explains, adding that his firm can help Chinese clients structure their wealth into forms like family foundations or trusts, and source interesting private equity deals; indeed they go as far as providing help in obtaining overseas passports and buying properties for those looking to move abroad.

This contrasts sharply with the approach taken by banks, which largely focus on pitching products. He says his firm sees client relationships as being of the utmost importance especially in the context of this Chinese expansion. “It centers on building very strong relationships, understanding your clients and providing services based on what they need,” he reasons. That’s the rationale for his firm seeking to partner with a local organization which has built a broad client base.

Mr. Graham sees the allure of China as being rooted in the continuous emergence of millionaires who have made fortunes as a result of the phenomenal success of their businesses. Typically, he says, his firm’s clients have made their fortunes from just one country and one sector; so not surprisingly they now seek to diversify their wealth away from those narrow confines.

“Our company was established by entrepreneurs, so we understand how entrepreneurs think, and what their requirements are. And in that context, China is the most obvious place. However we are looking out to Southeast Asia as well; I think Indonesia and Singapore are very interesting. Nevertheless our focus now and for the next few years is definitely going to be China.”

In his estimation, western firms in this space presently have a competitive edge in the Chinese market because it is one in which people see family offices as a fresh concept. He believes there is a pressing need for the newly rich to seek help from experienced people who can understand the issues facing their families, such as the demand for wealth management, family governance and securing top tier schooling for their kids.

Thus he is sanguine about the growth of family offices in both China and the region, the driver being this new, burgeoning affluent super-class. He expects the number of family offices in Asia will be ten times what it is today, with perhaps as many as 100 to 200 family offices in place. Another impetus, though, is coming from the opposite angle, from the European family offices likewise looking to exploit the demand from emerging markets. 

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Friday, July 31st, 2015 EN

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