The man who runs the family office of one of Thailand's leading families talks about strategic investment, secrecy and succession, writes Marc Smith.
Thirty-five years ago, third-generation Kirit Shah was told by his father to circumnavigate the globe to meet present and future customers of his family's rice trading business. The 22-year-old returned from the trip convinced that the company's reliance on a monoculture could yield far greater cash crops if it diversified and the seed was sown for the company's expansion.
The GP Group, as the Bangkok-based family business is now known, is today comprised of 16 companies that range from aluminium producers and tourism companies to insurance brokers and fashion outlets. Kirit, 57, is group chairman, but retains an entrepreneurial spirit that extends to the family office he formed in 2008.
"Kirit views the family office as just another professional business that he owns, which helps me," says Shiraz Poonevela, a former investment banker brought in to run the family office.
What this means is that, far from being someone who believes he can transfer his business success to wealth management success – the undoing of many wealthy but vain entrepreneurs – the chairman's philosophy has been to divorce ownership from management. "This is why he is a serial venture capitalist – he firmly believes in seeding companies then putting professional managers in place to run them – even his own family office," explains Poonevala.
However, while the patriarch agreed not to get involved in the day to day running of the family office, Poonevala admits Kirit does have the final say on all decisions.
The raison d'etre of the family office is far from being just an investment vehicle for the family's wealth – it is also to solve a tricky succession issue that will ensure the family office will provide for generations to come.
Kirit's three children are all in their 20s but none currently work in the family business. It was this brutal fact that pushed him to set up the family office and ensure his children had a secure future whether or not they decided to follow in his footsteps.
For Poonevala, this means transition is a key challenge, particularly as he says the concept of sharing knowledge and information is alien to many Asian families. "It is true they are more secretive, however because this family office only serves five family members, it is more open than most," says Poonevala.
He admits that as it's the first time the family has opened up its wealth to outside professionals, there were understandably some hurdles around trust to overcome: "When I joined there was a whole issue around how much he would trust me – sometimes he forgot to tell me important details until late in the day! – but overall I have no regrets about joining and the family has been transparent and lived up to the commitments it gave me when I started," he says.
Although the family office was set up because the GP Group was generating what Poonevala describes as "a whole lot of cash", the family office is relatively illiquid given its close ties to the operating company. In practice, this means that the family office has an important role in overseeing the different companies in the group as their performance directly impacts the returns that the family seeks from its investments.
The investment focus of the family office is private equity and Poonevala, who is tasked with overseeing domain experts who help with strategic investments and with the running of some of the group's businesses, is confident they are sufficiently well diversified.
To ensure that the family has the liquidity to make a cash call if needed, Poonevala developed a fund management side to the family office. "When you have such stature and wealth you don't always realise that you may need money quickly – you think it is always around," he explains.
However, the family is a reluctant financial investor. Poonevala says his boss has never been happy simply making money from money. "Kirit is a creator who likes to build businesses. If a private banker comes to him saying he can double his money in five days he is not interested. If he builds a business and it works then great but if it fails then he says that at least he has learnt a lesson. That is the nature of the individual and the family."
Given his background, Poonevala says it took a while to get used to the family's interpretation of investing for the long term: "We think in terms of 50-100 year timescales which I would never have done as an investment banker! [Kirit] says it is his legacy – even if his children screw up, his grandchildren wont be found wanting." Despite this culture shock, Poonevala says he is a lot more comfortable making decisions even if he is under a different kind of pressure.
This long-term view is mirrored in the wealth set aside for preservation, which is run along endowment lines. "We have one private bank we work with and meet with once a year to review our requirements. We allocate and adjust the investments we have accordingly then forget about them until the following year," says Poonevala, who says he further employs an HR manager, a lawyer and a business process and risk executive to aid him in his daily work.
You would think that being based in Thailand has some obvious back office challenges – not least a lack of on-the-ground knowledge of the specific needs and requirements that family offices have. However, although Poonevala says he is not aware of any other Thailand-based family offices, he says global communications mean he can source everything he needs– not that much is utilised locally in Bangkok.
Tellingly, Poonevala says that it is the not these concerns that influence the reasons why the family office remains based where it is: "Although the family is of Indian origin, it has been based in Thailand since 1918. Having an HQ here is more about convenience, quality of life and being close to friends."
When he considers how the family office will evolve, Poonevala is convinced change is in the air. "I think the next generation will have a very different view to their father as they are western educated," he says, perhaps not realising that they are simply repeating the regeneration that Kirit himself initiated when he was sent around the world to gain an appreciation of the family business.