For Kuok Meng Xiong’s (郭孟雄) family office, last year was a bumper year, with investments in technology start-ups such as Bytedance Inc doing well throughout the COVID-19 pandemic. Despite this good fortune and promises of a vaccine, the grandson of billionaire Robert Kuok (郭鶴年) remains wary about private deals in the year ahead.
“We anticipate COVID may be protracted even with the vaccine, and travel may not go back to pre-March 2020 days so the early-stage start-ups would be challenging,” he said, adding that he only spoke for his tech-focused remit at K3 Ventures Pte and not his family’s Shangri-La hotel empire.
It is a view shared by many of his Asian family office peers. Government subsidies for jobs and loans that have helped prevent broader meltdowns are set to end in the coming months, and vaccines might take years to be fully deployed.
When combined with continuing geopolitical strife between China and the US, that has left many of the region’s wealthiest clans feeling anxious.
“The key word is ‘uncertain,’” said Ben Benjamin, cofounder at Genesis Alternative Ventures, which provides debt funding to start-ups. “A lot of the pain and the shock that was brought about by COVID-19 is going to come to the fore in 2021.”
Their caution came even as Asian economies begin to bounce back, led by China and India, and as the region’s stocks rally. It contrasts with the bullish forecasts of many capital markets specialists and Western family offices, with some even getting into risky assets such as bitcoin.
JPMorgan Chase & Co is predicting the strongest global recovery in a decade if vaccine distribution plays out as expected.
Asian billionaires and family offices weathered COVID-19 better than any of their global peers on average, according to reports from UBS Group AG. That has encouraged some of the world’s wealthiest families to establish offices in the region, with Singapore becoming a key hub.
In interviews with several family offices about their investment plans for the year ahead, one common theme emerged amid the uncertainty: be selective.
TECH START-UPS
Kuok, for one, sees opportunities from his base in Southeast Asia. Singapore’s goal to source 30 percent of its food supplies locally became especially pointed after COVID-19 shuttered international trade so he has invested in alternative proteins, cell-based meat makers and agri-tech start-ups like Perfect Day and eFishery, with more to come this year.
Other focuses would have a technology bent. He likes software-as-a-service and is looking for nuanced ways to make money off “super-apps” such as Grab and Gojek as they diversify and decouple key parts of their systems. Both ride-hailing giants are setting up payments and financial services divisions.
However, Kuok said all of these would have to be approached carefully because of the challenge to roll out vaccines. Some countries, such as the Philippines, are not expecting to complete their programs until 2023.
“It forces us to be very disciplined, to go back to first principles and to gain our conviction on a case-by-case basis,” Kuok said.
DEBT DEMAND
Benjamin, whose family has been in the retail industry for two generations, predicted it would take another 12 to 18 months for economies and consumption to truly recover.
“We’ll invest where the opportunities arise, but it’s only prudent in these times to keep cash as well,” he said of his investment plans.
Still, the health crisis helped venture debt firms like Genesis, which he cofounded in mid-2019 with the backing of Singapore’s Sassoon family, in part because a wide range of start-ups sought to borrow money to run their operations instead of diluting their own stakes by selling more shares.
Benjamin said it funds less than 10 percent of the opportunities that come its way, with no defaults so far.
“You see quite a lot of companies looking to take advantage of growth during these COVID times,” he said. “History has shown periods of disruption such as the one we’re in now actually facilitate growth and I think technology companies have shown that in the last few months.”
PRIVATE EQUITY
North-East Family Office managing partner Sam Robinson, whose Denmark and Singapore-based firm manages the wealth of jewelry retailer Pandora’s founders with about US$3 billion in assets, said he was maintaining a cautious approach to investing in private-equity funds throughout the region.
Even so, he expects to invest more this year than he did last year, with a slight lean toward funds that back technology and healthcare companies, as well as undervalued firms with the potential of bouncing back over the coming years.
It backs about 25 funds across the Asia-Pacific region.
“Right now we’re in such a weird situation where you have things that are doing better than they should be and things that are doing worse than they probably will be eventually,” Robinson said, citing government stimulus as a key reason some companies have stayed alive, despite the recession.
SILVER AND GOLD
Instead of putting money into private deals and start-ups, some Asian family offices are taking a different tack.
AJ Capital Asset Management chief executive Abhinav Jhunjhunwala said he plans to ramp up investments through this year with precious commodities like gold, silver and their associated miners key targets.
Similar bets helped his firm return “high double-digit growth” last year, he added.
Jhunjhunwala said silver is at a low compared with its historical highs and rising inflation would help rally gold prices — a view backed by analysts at firms from Pictet to Societe Generale.
“Commodities, emerging markets, cyclicals and financials all form significant allocations for us,” he said. “The thesis is very much driven by the idea that there’ll be a continuation of both fiscal and monetary support.”
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