Asia, impact investing to gain as US$15 trillion change hands among world’s wealthiest families over next decade
- The ESG sector is growing extremely rapidly, BlackRock says
- Singapore and Hong Kong to continue to compete for international wealth management business
Asia and impact investing look to gain as wealth is transferred between generations among the world’s wealthiest families over the next decade.
As much as US$15.4 trillion will be passed down from one generation to the next until 2030, according to global wealth researcher Wealth-X. The company looked at people holding US$5 million in assets or more, which amounted to 2.6 million people collectively holding US$57 trillion in assets.
The biggest transfers are expected to take place in Europe and North America, with US$8.8 trillion changing hands in the next decade. Of this, US$3.2 trillion will be transferred in Europe.
The transfer will be relatively smaller in Asia – US$1.88 trillion – as business owners in China and India are relatively younger.
Ageing tycoons’ succession plans will shape China’s future
The shift to a younger generation could trigger new interest in impact as well as ESG [environmental, social and corporate governance] conscious investing, Wealth-X said. It said that while preserving wealth was the main interest, younger inheritors were also “noticeably” more concerned about the impact of their wealth on society and the environment, shown by an increasing interest in impact and responsible investment.
Scott Hasley, the managing director and head of US/Canada family office business at BlackRock, said in a statement: “The ESG sector was something very few of our clients were interested in a handful of years ago. While it remains a relatively small asset class, it is growing extremely rapidly. Today, I would estimate that 80 per cent of our clients are directly investing in equity, fixed income and/or alternative ESG solutions, or exploring the asset class in earnest.”
Dr Rebecca Gooch, researcher with Campden Wealth, a family office specialist, said last year: “Our research shows that the next generation, and millennials in particular, are driving impact investing within the family office space. This is key as we are on the precipice of a major generational transition set to take place over the coming 10 to 15 years.”
Wealthy investors were increasingly looking for opportunities in Asia, and for extremely wealthy families in Europe and North America, that meant setting up a family office branch in either Singapore or Hong Kong.
A report published last year by KPMG and the Private Wealth Management Association of Hong Kong, an advocacy group for the private banking and wealth management industry, surveyed private wealth managers, who identified overseas family offices as the second most important area of growth for Hong Kong, wealthy mainland Chinese investors being the most important.
Wealth management businesses in Hong Kong and Singapore have tried to develop standards around their practices, while pushing government agencies for friendlier regulatory regimes.
In the past decade, the two cities have moved up the ranks of international financial centres – places where the world’s wealthiest citizens park their money.
Chinese family businesses look beyond kin for managers
In Hong Kong, the PWMA released a white paper in 2018 calling on the city’s government to offer greater tax incentives and clarity to entice more family offices to set up here.
In Singapore, which industry officials in Hong Kong have said is moving aggressively to court global ultra high-net-worth individuals, banks have been establishing wealth management training programmes to add to their roster of private bankers. In 2018, OCBC Bank Singapore announced a training partnership with the Wealth Management Institute of Nanyang Technological University to turn retail bankers into private bankers.
According to Wealth-X, individuals with US$100 million in assets or more numbered just 18,840, yet were responsible for about US$8 trillion in asset transfers. In Europe, those with US$100 million or more were expected to transfer more than US$2 trillion in assets, while in North America, it was US$3.7 trillion. About 63 per cent of the wealth that Wealth-X said would be transferred was among those worth US$100 million or more.
