According to the 2018 Preqin Global Private Equity & Venture Capital Report, 53% of private equity fund managers surveyed by Preqin towards the end of 2017 have established an ESG policy or have one pending. The adoption of ESG factors into their fund strategy is in line with global institutional investors’ rising interest in environmentally and socially responsible investment opportunities. Asia-based family offices are one investor group where impact investing is gaining traction. ‘Impact investing’ is defined as investing with an intention to generate both financial returns and environmental or social good. As family wealth is transferred down to the next generation of millennials, these new owners are more likely to adopt impact investing as a more efficient use of family wealth to create social impact than traditionally favoured philanthropy.
Preqin’s online platform tracks 92 Asia-based family offices investing or considering investment in private equity. Family offices are the fourth most prominent investor type in the region at 9% of all investors. As some of the wealthiest countries with highly regulated financial environments, Singapore (34%) and Hong Kong (30%) account for the largest proportions of family offices within Asia.
Healthcare, cleantech and education are examples of industries consistent with the idea of impact investments due to their positive long-term and sustainable effects on the community. As seen in the chart below, the proportions of Asia-based family offices investing in private equity with a preference for each of these sectors have increased over the past year. The healthcare and education industries have experienced the greatest percentage-point increase in interest, which include initiatives such as disease prevention and EdTech (education technology).
Family office investors active in private equity impact investing include Singapore-based Leonie Hill Capital, which looks to commit between $900mn and $1bn to approximately 10 private equity funds in the coming year. The family office has a preference for sectors such as biotechnology, cleantech, energy, healthcare and financial services. Hong Kong-based RS Group has an investment mandate with a sole focus on sustainable and socially responsible impact investing. It is known to have previously invested in SJF Ventures III, an expansion-stage venture capital fund focused on investing in high-growth, positive-impact companies in the US. It also committed to Oasis Fund which invests in enterprises that directly benefit low-income communities by providing access to healthcare, clean water and education.
Asia-based family offices are part of an evolving landscape: as demographics of owners are transitioning from baby boomers to millennials, social consciousness towards investing is developing among these new owners. Consequently, impact investing will remain an important element of Asia-based family offices’ investments in private equity.