The future of Hong Kong family offices

Avenue Family Office is a large external asset manager based in Hong Kong, with the majority of its client base in Hong Kong and  mainland China. Eric Pong, Avenue Family Office’s founder, explores why political risk in Hong Kong is a primary concern for clients

 

What are your clients’ main concerns currently and how are they positioning? 

Eric Pong: Political risk in Hong Kong is one of the biggest issues clients are having to deal with. Some family clients are asking us to switch from booking assets in Hong Kong to Singapore or Zurich. 

In the long term, they are concerned about the political aspect – the future of Hong Kong. But, in the short term, we are not avoiding investment in China- or Hong Kong-related investments. Clients see the stock market performing well.

However, for medium-term positioning, some are looking to reduce loan liabilities, take profits after the rebound in markets in March and reduce emerging markets exposure. In any case, they don’t invest in illiquid assets – if anything goes wrong, we can liquidate as quickly as possible. I personally think Hong Kong’s financial system remains resilient and the competitive edges will continue to sustain its leading global financial centre status. Yet, Hong Kong will need some time to recover from the pandemic and various impacts.

 

How does Avenue Family Office manage risk?

Eric Pong: We use hedging instruments – foreign exchange forwards to hedge our investments in Singapore or UK bonds, for example, but not complicated products. Portfolio diversification and asset management are crucial which we always take a flexible asset allocation to cope with the rapid changing investment environment.

 

Does Avenue use any market access products?

Eric Pong: We have an actively managed certificate issued by UBS that we set up a year ago. It mainly participates in equities in Hong Kong, the UK and the US.

UBS has a very good reputation and credit rating, so we don’t need to worry about issuer risk. It also has a comprehensive equity trading platform.

 

Does Avenue Family Office incorporate environmental, social and governance (ESG) factors into its investing process?

Eric Pong: When we are going to pick any investment or stock, ESG is one of the key issues we will focus on – for example, whether a company has sustainable growth, good governance, and so on. These are key factors that will affect the share price of companies. We have been looking at ESG factors more and more.

 

Family office investing – Special report 2020
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