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INVESTMENT, WEALTH & SECURITY


Family Offices – control, co-investing and outsourcing


Joe Marsh put some questions to Asian Family Office experts; selected highlights are presented here.


When it comes to clients, say, that want to do real estate in China, how important is the issue of control? TK CHIANG, CO-FOUNDER AND MANAGING PARTNER OF ORION PARTNERS: “Well, foreign Family Offices wanting to co-invest into a specific country are looking for someone who can guide the local terrain, so having control of a project doesn’t make practical or pragmatic sense. It partly depends on the structure of a family office. If it’s a large separate entity, it will typically have investment- oriented individuals but not business operating staff. If they invest into a shopping mall and the mall runs into problems, the investment team is not going to start running the mall. So family offices usually look for influence on the investment, rather than control over it.”


What extent do you use external asset managers? ALVIN TAY, MANAGING DIRECTOR AND HEAD OF SINGAPORE AT CAMBRIDGE ASSOCIATES: “It depends on the size of the portfolio, and on whether they have any unique requirements. Unless there are any specific requirements – an example may be screening for stocks that do not meet certain SRI [socially responsible investment] criteria – we tend to advise clients to go for commingled mandates, because that’s less hassle. The manager takes care of everything, from the custody to administration and so forth. They can do that across all asset classes from long-only, to hedge funds, to private equity and real estate. “


HENRY LEE: FOUNDER AND MANAGING DIRECTOR OF HENDALE ADVISORS: “I use asset managers on a discretionary basis and also advise firms on using them. But I generally advocate doing as much in-house as possible, because that enables you to participate more in the decision-making process. It also allows you to build a knowledge base for the future and, to be honest, there’s really not that much alpha to be gained by outsourcing.”


And yet, given that it’s early days for Asian Family Offices, many probably do a lot of outsourcing because of limited resources? HENRY LEE: “It’s both – a lot of the larger families have the resources to do a lot of functions in-house. However, that’s not to say they are the right resources, but for good or for bad they think they have the resources. External managers do have a role when it comes to more industry-specific investments. For instance, a real estate family might want to diversify into natural gas, or a retail-based family might want to have exposure in the internet space.”


AUDREY LO: FOUNDER AND MANAGING DIRECTOR OF ALPS ADVISORY: “We use external managers, but the research is a lot of work. It’s not as if you can just choose whoever shows you the best numbers. Excellent performance may be caused by style drift. You want to use a manager who can pick security by security and who is an expert in their field. We do our own primary research, together with strategic partners overseas – other MFOs with their own research capabilities. For example, we might look after Asian managers for a US-based office, and they would look after some US-based managers for us.”


Audrey Lo


This article is based on a featured that appeared in the AsianInvestor, where Joe Marsh is the editor. asianinvestor.net


I generally advocate doing as much in-house as possible, because that enables you to participate more in the decision-making process.


– HENRY LEE FOUNDER AND MANAGING DRECTOR OF HENDALE ADVISORS


FAMILY OFFICE: THE FUTURE 75


INVESTMENT, WEALTH & SECURITY


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