A challenging investment environment and increasing governance requirements have impacted the needs of ultra high net worth investors. Given these dynamics, it has become more important than ever for family offices to have the robust and flexible systems necessary to address the inherent complexities of managing significant wealth and secure their legacies for current and future generations.
At a recent event in Hong Kong, jointly hosted by Maples Fund Services and Bloomberg, panellists discussed the various challenges facing family offices as well as how technology can be used to transform operations and drive returns.
The private wealth sector has been experiencing notable growth in Asia. As wealth in the region has increased in concert with economic expansion, there has been a proliferation of family offices dedicated to serving the interests of ultra high net worth individuals and their families. It is crucial that these family offices continue to evolve and leverage best-in-class solutions that can accommodate their individual nuances.
One key area driving this evolution is increasing investment complexity and diversity. Maples Fund Services performed a study on behalf of an institutional investor industry association that looked at the impact of various asset allocations on risk-adjusted returns. The research showed that higher allocations to alternative investments - including hedge funds, private equity and real estate – successfully reduced volatility while maintaining performance.
Family offices are starting to pursue alternative strategies with this in mind. In doing so, they have added alternative investments to portfolios that already contain a diverse mix of traditional instruments, such as equities, direct holdings of private businesses, along with more exotic assets such as art. The sophistication of these portfolios necessitates a robust technological infrastructure - backed by data management and accounting expertise – to produce meaningful consolidated reports for family members.
Another key factor impacting family offices is the increasing involvement of multi-generational stakeholders in strategy and operations. This presents new, and perhaps competing, priorities and perspectives and may prompt the need for better governance practices which may include introducing independence to certain operational processes. With investment operations costing about 1 percent of assets annually according to industry estimates, there is a strong desire to ensure that those expenditures are being deployed in the best manner possible. In this respect, family offices are more attuned to the myriad solutions available in the market and are seeking solutions to maximise the value of technology versus the cost, risk and effort required to create and maintain an in-house infrastructure.
Given the inherent diversity and complexity within the space, that here is no one size fits all approach for family offices. Instead it is important to cultivate relationships with the right operational partners who are committed to delivering dynamic solutions that are customised to individual needs. Maples Fund Services prides itself on having an appreciation of the nuances of the systems and operational needs that differ between family offices and boasts a robust technological infrastructure and breadth of ancillary and complementary services and resources that can support family offices’ needs today and in the future as they grow and evolve.