Trophy buildings are the favourite real estate investment for wealthy Asian families despite concern the market in the region could be overheating, UBS says.
Investment allocation in real estate has grown to 16 per cent this year from 9 per cent last year, according to a report by research firm Campden Wealth that was commissioned by the Swiss bank and published yesterday.
Twenty-nine family offices across the region with managed wealth of a minimum US$200 million were interviewed about their investment allocation strategy and outlook for markets.
"The family offices expected they will increase their investment in real estate further, to 22 per cent, in three years' time," said Lau Yan, a managing director and head of family services at UBS Asia Pacific.
"For good quality real estate in prime locations, investors believe they won't be making a wrong decision if they buy, even if the price is sometimes too high."
Real estate investment saw the biggest asset allocation of all the region's markets and was particularly strong in Hong Kong, UBS said.
Lau said investors preferred assets which could be touched and seen, rather than being on paper like stocks and bonds, the issuers of which could go bankrupt overnight, after witnessing the market trough sparked by the global financial crisis.
Besides real estate, the only other asset class where investors were looking to increase investment in the coming years was equities in developed countries, the report said.
In contrast, wealthy families are holding 14 per cent of their assets in the form of cash or cash equivalents at present but expect that allocation to fall to 8 per cent in three years' time.
The second annual UBS/Campden Wealth Asia-Pacific family offices survey found that investment allocations to venture capital and direct private equity had grown to 15 per cent this year from 4 per cent last year.
Asian investors are taking money away from equity and bond markets to fuel this move into direct investing, with equity market allocations in developed countries falling to 14 per cent of total assets this year from 21 per cent last year, according to the report.
Hedge fund investing by Asia's wealthiest families was cut by nearly half in the past year to 5 per cent this year, the report said.
Family offices are relatively long-term investors, with 74 per cent seeking to invest for at least five years.
UBS said wealthy families were becoming more bullish about investment prospects and twice as many respondents said they were more optimistic about the investment outlook than one year ago.