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THE FAMILY OFFICE


Family offices and the new


SCOTT A J MACDONALD


According to the BBC TV series Megacities, China has 700 billionaires, and is building a new city the size of Chicago every three months and a large power station every few days. This rate of economic expansion is unprecedented in history. But where will these new ultra-high net worth individuals (UHNWIs) invest their new wealth?


M


any of these new wealthy are born or educated in the West, particularly Britain, Canada, Australia and the US. They understand global markets, and


are able to combine the economies of scale China offers with their imported knowledge of economics and international relations. The combination of culture, education and international trade is a heady mix – an entrepreneurial elixir. This new wave of entrepreneur is likely to seek


professional guidance and balance this with their own analysis. As the first wealthy generation of a new ultra- rich elite, they do not relinquish control lightly. The traditional, trusted model of seeking advice from a well-regarded private bank is offset by the availability of the new technology for education and information, the internet, which allows quick and inexpensive comparative analysis and direct communication. Social networking is likely to become more specialized, and groups will find ways to use the internet for global communication and co-investment.


The need for counterparties The International Family Office Association aims to become one of these specialist portals. IFOA is in the early stages of creating a global platform for this previously fragmented and private group, partly because


34 FAMILY OFFICE: ASIA TOMORROW


of the many new entrants, and partly because the most exciting and profitable investment opportunities are to be increasingly found in emerging and frontier markets. IFOA sees the globalization and


democratization of capital occurring more quickly. Seeking out reliable private counterparties was once the sole domain of investment bankers and private bankers, but the capability of the internet in supporting specific interests is seeing the disintermediation of these banking clubs. Deal-matching platforms such as MergerID, with its US$46bn of transaction value, will be utilized to seek private counterparties globally and online. More and more of these counterparties will be the


new UHNWIs and family offices emerging from Asia, and families from the Middle East seeking to diversify from traditional markets and seek opportunities in emerging and frontier markets.


Major changes Asia comprises more than a third of the world’s land mass and two thirds of its population. China and Japan are the world’s second and third-largest economies, and China has been growing at 8 to 10 per cent a year for the past 10 or more years. The Asian Tigers –


wealthy in Asia A heady mix of culture, education and trade


10%


THE RATE CHINA’S ECONOMY HAS BEEN GROWING EACH YEAR OVER THE PAST DECADE.


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