Asian family offices to challenge on comp amid investment talent crunch

More than 90% of APAC family offices plan to maintain or increase private equity activity next year, according to research from Campden Wealth and Raffles Family Office.

Asian family offices are expected to start competing with North America on compensation amid a regional shortage of affordable investment talent.

Roughly half of all family offices in Asia-Pacific plan on increasing their staff over the next year, according to The Asia-Pacific Family Office Report from multi-family office Raffles and Campden Wealth. The most common drivers were to expand family office operations (23 percent), bring more services in-house (14 percent) and fill gaps in expertise (11 percent).

Compensation may prove an obstacle to these plans, with the average family office CIO in Asia-Pacific earning just $232,000 in base salary, versus $448,000 in North America. Asia-Pacific CIOs on average receive a bonus worth 28 percent of their salary, compared with 33 percent in North America.

Kwan: Family office professionals are not cheap

“In Hong Kong, Singapore, there is definitely a shortage of talent simply because of the way we are growing – the amount of billionaires that are being born basically every 48 hours,” Chi Man Kwan, group chief executive and co-founder at Raffles Family Office, said at a media briefing in Hong Kong on Wednesday.

“Sometimes it might be a bit tough for [family offices] just to find the right people, and at the same time to afford them, because the costs play a big part as well. These professionals are not cheap.”

Some 80 percent of Asian family offices already participate in the asset class and more than 90 percent plan to increase or maintain their activity in 2022. The average family office in the region has a 16 percent allocation to private equity, including 9 percent via directs and 7 percent via funds.

The most popular private equity deals are venture capital direct investments, with 59 percent of Asian family offices allocating to these. This is slightly higher than the global average of 53 percent.

Asian family offices have a greater propensity to hire from within than other markets. The average organisation in Asia-Pacific has 10 members of staff, two of which are family. This compares with a global average of 11 members, of which just 1.4 are family.

“The biggest place where this is a problem is China, because at the moment, families – particularly one with the patriarch or matriarch still there – insist on hiring people they know over a professional,” Nick Hayward, a director at Campden Wealth, said at the media event.

“The trust thing is very embedded across Asia-Pacific – that we have to know this person, and not just know them for a couple of years… That is going to change and I would expect in five, seven, eight to 10 years you will actually see the cost of these executives in Asia… go up above North America, but that is going to be a process of professionalisation.”

Speaking virtually at the Cyberport Venture Capital Forum in Hong Kong this month, Professor Heinrich Liechtenstein, of Barcelona’s IESE Business School, told delegates that recruitment should be a greater priority than financial concerns such as tax domiciliation when launching a family office.

“You need an excellent team,” Liechtenstein said. “How to attract the best team… is probably the biggest challenge for family offices – private equity people can become really expensive.”