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Asian family offices bet big on risk — but that could be changing

Singapore city skyline on September 18, 2016.

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Asia’s family offices used to have a far bigger appetite for risks compared to their global counterparts — but that could be changing, according to a recent survey.

A Citi Private Bank global survey in the third quarter of the year showed there has been a shift out of cash and into risk assets by family offices around the world — but with one notable exception, Asia.

A family office is a private wealth management advisory firm that caters to high net worth individuals. Citi’s survey was conducted on its family office clients, who collectively had a total net worth of $565 billion, and hailed from across the globe — with two-thirds coming from outside North America.

What sets family offices apart from traditional wealth managers is that they solely offer services to an affluent individual or family.

Global family offices have made a 'shift back out of cash into risk assets' in last 3 months: Citi

Asian family offices allocated far more funds into risky assets than low-risk assets in the first half of the year, Hannes Hofmann of Citi Private Bank told CNBC’s Squawk Box Asia in late November.

As such, “it’s harder for them to add to risk at this point,” he added.

About 44% of assets held by Asian family offices were private and public equity, compared to 30% to 33% in cash and fixed income, according to Citi’s Hofmann.

That’s a much bigger differential than family offices in the U.S., Europe, or in Latin America.

Hungry for risks

There are several reasons for the comparatively huge risk appetite of Asian family offices, including a historically low interest rate environment and bets on China’s post-Covid recovery, which has since lost ground.

Citi also noted that the potential slowdown in China and disruption of supply chains had a strong impact on the portfolio allocation of Asian family offices.

Another factor is that equity markets in Asia have fallen so far this year, compared with the U.S. or Europe.

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