UBS releases Chinese Family Office and Wealth Management Report

UBS has released its Chinese Family Office and Wealth Management Report, offering insights on an array of topics from Chinese family office operation and use of external service providers, to investments and performance, and the transition of wealth between generations.

Produced by Dominic Samuelson (Chief Executive Officer, Campden Wealth), Anurag Mahesh (Head Global Family Office Group APAC, UBS Global Wealth Management), Fan Xiaoman (Founder & CEO, FOTT), and Fan Hua (Vice General Manager, AVIC Trust), the report aims to fill an increasingly important vacuum of information regarding the Family Office and Wealth Management landscape in China.

Noting the rapidly developing financial infrastructure and the immense economic growth that China has showcased, the report highlights how these circumstances have driven a sharp rise in the number of ultra-high net worth individuals, with many of the country’s wealth creators are now entering their mid-50s, according to the report, and thus considering inheritance and succession planning.

These circumstances set the stage for the proceeding topics explored in the report, observing the rapidly growing and maturing Chinese family office arena, and describing the potential impact of the relatively subdued global economic environment and heightened uncertainty on business and investment in the country.

The report names one key finding as while many Chinese families of significant wealth are using family office services, nearly two-thirds, family offices are also facing challenges, including in recruiting talent and finding external service providers.

In terms of investments, the report finds that private equity is preferred to public equity, with the latter constituting 17% of the average portfolio, lower than the former’s 20%. As with much of the character of the landscape, the central explanatory factor seems to be that the wealth creators are still around, still active, and keen to be hands-on, according to the report foreword.

The report states that the average family wealth is RMB6.5 billion, with the average AUM of a family office in China found to be RMB4.2 billion. It also finds that most families have maintained control of their business, with two-fifths having their businesses listed.

The average age of the generation currently in charge of family wealth is 55 years, according to the report, and that the key motivation is maintenance of wealth. The primary wealth management vehicle is a single-family office for 30% of the 66% of families with a family office; commercial multi-family offices account for 16%, and private multi-family office and hybrid family office stand at 9.2% each.

According to their findings, real estate is the most common industry in which wealth originates, with 29% of participants reported that their family wealth originated in the real estate industry – twice the global figure.

Establishing a family office structure accounted for 35% of the top ranked challenges that family offices are faced with; recruiting outside talent 21%, and finding experienced service providers 21%, when surveyed on the central challenges wealthy families and family offices face.

Of those who do not currently use family office services, over three-quarters are interested in either setting up a single-family office (44%) or joining a multi-family office (33%). Of those interested, 84% are actively taking measures.

Of the remaining revelations, Roughly the same proportion of participants have adopted a growth-oriented investment strategy as a balanced approach, standing at 44% and 43% respectively. The average portfolio returned 11% in the last 12 months, with Private equity was the top performing asset class.

Fixed income constitutes the top asset class, and private markets were found to be preferred to public ones. And finally, the most popular paths to service providers were found to be recommendations from professionals already known (87%) and from family and friends (54%). Trust, confidentiality/security, and reputation are the most critical considerations – with 91%, 84%, and 76% indicating that these are very important criteria, respectively, according to the report.

For further details, and more in-depth insights, the full report can be found HERE.