Campden Wealth looks forward to hosting the latest Asia Pacific Family Investment Conference in Singapore on 17-18 May. Nick Hayward, regional director of Asia Pacific at Campden Wealth, explains how the eighth annual event will address the common challenges confronting Asian families. Among the obstacles? The up-and-coming generation taking on responsibilities for operating businesses, managing established wealth, and making decisions, “which will impact the likelihood of passing on to the following generations a substantial legacy that will withstand the global curse of the third generation.”
At the top of the ‘decision trees’ families must face is our theme for the 2017 conference: What do we as a family insource and what do we as a family outsource? And how to reach the right decision?
Embedded in this deceptively simple question is a hard assessment of skill sets, the state of legacy businesses inherited, the view of new owners of new opportunities, local to regional to global or reverse, diversify business lines, digitise, go financial, invest but only in operating businesses, or bring in outside partners such as private equity firms. In short, on getting the keys to the kingdom what needs to be updated, professionalised, bought or sold according to family risk tolerance, cost of funding and desire to retain control? And where do families need help?
Managing operating businesses is not the same as managing wealth through funds and markets or investing direct as Asian families typically prefer. Management of counter parties whether as a business owner, with banking counter parties or managing wealth, with asset managers, requires a detailed and current understanding of the models that the counter parties operate under now and how they will change.
The bank of just five years ago does not exist today. In Asia, local and regional banks, that have provided the back bone of ‘mid cap’ funding and have helped to build many family fortunes in Asia as reliable and stable sources of funding, will be unrecognisable in just three years. A leading regional bank expects that the compression on local and regional Asian banks ability to act as the primary credit multiplier may be impaired by up to as much as $3 trillion. A huge amount of money across the Asean region to date is reliant on banks as the primary funding tool.
With little depth to capital markets and next to none ‘market-based finance’ how will this story unfold? Where will future funding come from and in what form? Campden Wealth debates this on a couple of panel discussions on our second day where we look at the shortfalls and how these opportunities for family offices, investors, and market based finance players might work together. It impacts owners of operating businesses and it impacts would be investors in the Asean growth story–for many families it is two sides of the same coin. Changes to funding costs will present opportunities for those with strong balance sheets.
Performance of those that have been tasked with the long-term management of wealth is also under the microscope with clients seeking above market returns but also ‘value for money’ as new, cost effective, and transparent methodologies legitimately compete with more opaque forms of investment that has now under-performed primary indices for more than a decade in both the USA and Europe. High fees and underperformance cannot be the future for the active management industry - if they are to have a future and remain a trusted industry acting as custodian of long-term family wealth.
We will also examine how the professionalised next generation may have a very different perspective on the role of markets and asset management, the acceptable levels of risk/return and frameworks to secure wealth for their children and grandchildren to come. Making money and preserving money demands very different skill sets. How do the next generation view this responsibility and how will they do things differently from “Dad”? As “Dad” will not have had to think about the role of robo-advisers!
The conference gives impact investing a thorough examination through the lenses of running operational businesses with an impact lens, investment with an impact lens, and break-out groups. This will allow attendees to share views on what remains quite a nascent, though rapidly growing and accepted, part of the ‘next generation’ tool kit for long and sustainable investment in companies that adhere to business practices that help, rather than hinder, the global community.
The vast majority of the discussions, interviews, moderators, and panelists are led by Asian next generation sharing concerns, considering answers and leaning on their own sense of best practice on how to tackle the future which many families in Asia face. The panels and presentations are ably supported by a range of sponsoring partners bringing professional perspectives on these questions.
The two-day conference will provide a comprehensive overview of several key themes, but always circles back to some of these fundamental questions which face the globalised, professionalised next generation taking on the task of leading families through the rapidly changing world. It will consider all the risks and new decisions that demand their time and attention.
But at the base–what do we insource, what do we outsource, what do we divest, what do we invest in and how will we make sure we build a fortress that remains vibrant for generations five and six? Decisions made by the next generation now will dictate that reality materialising and ensuring their own personal legacy within the family history.