Fam­ily of­fices look to emerg­ing mar­kets

In­di­vid­u­als and fam­ily in­vestors in­vest in more risky as­set classes

Gulf News - - Your Money -

Com­pa­nies that man­age port­fo­lios for in­di­vid­ual fam­i­lies are look­ing to in­crease in­vest­ments in emerg­ing mar­kets after higher eq­ui­ties helped them achieve aver­age re­turns of 7 per cent in 2016, ac­cord­ing to a re­port by Cam­p­den Re­search and UBS.

The com­pa­nies, known as fam­ily of­fices, had an over­all re­turn of 0.3 per cent in 2015, ac­cord­ing to the re­port, which sur­veyed 262 fam­i­lies with an aver­age port­fo­lio of $921 mil­lion (Dh3.4 bil­lion) in as­sets un­der man­age­ment.

“Over time, fam­ily of­fices have gone more illiq­uid and more risky in terms of as­set classes and this al­lo­ca­tion de­ci­sion Pri­vate mar­ket in­vest­ments have be­come a cru­cial part of sov­er­eign wealth funds’ (SWF) port­fo­lios, help­ing them bet­ter tap the po­ten­tial of key emerg­ing mar­kets such as China and In­dia, a Gold­man Sachs As­set Man­age­ment ex­ec­u­tive said. Global sov­er­eign wealth funds have been in­creas­ing their spend­ing on al­ter­na­tive in­vest­ments. Sheila Pa­tel, chief ex­ec­u­tive for in­ter­na­tional busi­ness at Gold­man Sachs As­set Man­age­ment said such in­vest­ments were par­tic­u­larly im­por­tant in lead­ing emerg­ing mar­kets where there are fewer listed com­pa­nies than in de­vel­oped economies. has ac­tu­ally paid off be­cause those as­set classes have per­formed well in 2016,” Sara Fer­rari, head of the Global Fam­ily Of­fice Group at UBS, said.

“They say they will con­tinue to be in­vested in eq­ui­ties and a lot say they are look­ing at switch­ing to de­vel­op­ing mar­kets eq­ui­ties from de­vel­oped mar­kets in search for yield, which is not very easy to find,” she said.

Forty-four per cent of the fam­ily of­fices sur­veyed said they were plan­ning to in­crease in­vest­ment in de­vel­op­ing mar­kets eq­ui­ties, while 21 per cent said they would al­lo­cate more to de­vel­oped mar­ket eq­ui­ties.

The MSCI’s All-Coun­try World In­dex, a widely-tracked in­dex of global stocks, has hit all-time highs this year thanks to low in­ter­est rates, re­ced­ing Euro­pean po­lit­i­cal risks, strong earn­ings and bet­ter growth prospects.

The aver­age fam­ily of­fice port­fo­lio cur­rently has 27 of its as­sets in­vested in global eq­ui­ties with 7 per cent al­lo­cated to emerg­ing mar­kets.

Fam­ily in­vestors also fo­cus on pri­vate eq­uity, tak­ing stakes in small- and medium-sized com­pa­nies. Pri­vate eq­uity funds ac­count for 20 per cent of the aver­age fam­ily of­fice port­fo­lio.

“This share looks set to grow fur­ther as ... 40 per cent [of fam­ily of­fices] in­tend to al­lo­cate more into pri­vate eq­uity funds,” the re­port said. Al­lo­ca­tions to hedge funds by fam­ily of­fices con­tin­ued to de­cline last year, fall­ing to 7.1 per cent from 8 per cent in 2015 and that is un­likely to re­bound, the re­port said.

The de­cline mir­rors a sim­i­lar trend among in­sti­tu­tional in­vestors, who pulled $11.5 bil­lion from multi-strat­egy funds in 2016 after three con­sec­u­tive years of net ad­di­tions, ac­cord­ing to data tracker eVest­ment.

Newspapers in English

Newspapers from UAE

© PressReader. All rights reserved.