High-net-worth individuals are increasingly relying on family offices to entrench and build up their wealth for enduring succession by future generations in a capital management hub like Hong Kong.

As the city continues to grow its pool of some 2,700 single-family offices, more than half of which have assets of over $50 million, the question arises as to how the new generation of these ultra-wealthy family scions could revolutionize the capital market, and how much they would bet on innovation and technology.

Man Lap, who cofounded Hong Kong-based startup fund Beyond Ventures in 2017, linking up venture capitalists and local entrepreneurs to give a push to the I&T stream, offers businesspeople a glimpse of what’s on the horizon. Since its inception, Beyond Ventures has made more than 50 investments, with assets worth over $270 million under its management.

Its portfolio boasts big names like Yoho, one of Hong Kong’s publicly listed online shopping pioneers; artificial intelligence powerhouse SenseTime, and Nasdaq-listed life sciences firm Prenetics.

Beyond Ventures’ story began with it securing initial investments through significant contributions from more than 10 Hong Kong-based family offices. Leading the charge was the Hung family, known for their franchise rights to Japanese fast food chain Yoshinoya and ice cream brand Dairy Queen. Marvin Hung Ming-kei, a fourth-generation member of the family, is another co-founder of Beyond Ventures.

Another deep-pocketed family that founded real-estate company Pioneer Global Group is also betting big on Beyond Ventures through a private equity firm, Gaw Capital Partners.

Man says he is grateful for the trust investors have placed in him as he has set his sights on venture capital without any track record although he has achieved some entrepreneurial success.

Seeds of change

Industry insiders largely agree that family offices are emerging as big players in Hong Kong’s venture capital landscape, especially with younger generations of affluent families showing more passion for technology and greater willingness to embrace risks, although the drawback that family office investments tend to be modest and inconsistent cannot be overlooked.

A growing number of ultra-high-net worth families worldwide have turned to family offices in recent years to manage their wealth. According to a 2024 report on global family offices by JPMorgan, investment management is the most important for almost all family offices, with portfolios covering stocks, cash, real estate, private equity, commodities, precious metals and venture capital.

Family offices are proving to be significant in venture capital for two main reasons — they are a vital source of earlystage investments and, compared with the hurdles faced in courting institutional investors, gaining favor from family offices often seems easier for startups and venture funds.

Man’s partnership with Hong Kong family offices was forged during Beyond Ventures’ infancy. He says that even as the city’s secondary investment market thrives, seed funding, historically, has been lacking. “Hong Kong needs early capital to uncover promising startups.”

Movers and shakers

Many wealthy local families have built their fortunes on real estate, and their first-generation leaders typically adopted a conservative attitude toward investment, favoring low-risk options with stable returns. But, as the baton is passed onto the second and even third generations, who are mostly educated overseas and have witnessed the transformative power of technology, there is a shift in investment priorities. Young people are making the technology sector part of their portfolios as reflected in their support for Beyond Ventures.

“New generations are more willing to invest in tech projects because economic transformation has taught them technology is the future,” says Duncan Chiu, a Hong Kong lawmaker representing the technology and innovation sector.

Eva Law, founder and chairwoman of the Association of Family Offices in Asia, observes that about 90 percent of investments in venture capital by family offices in Hong Kong and other regions of Asia come from the new generations of family scions. As young family leaders step into the limelight, a UBS report in May revealed that generative AI, healthcare, and green technology are among the hottest investment themes for family offices in the Asia-Pacific region. 

A separate report by JPMorgan showed that the investment decisions of nearly 50 percent of the 190 family offices surveyed were typically made by the family head, and 30 percent by an investment committee that includes family members. Up to 10 percent relied on informal consensus among family members while only 7 percent had their investment decisions guided by a chief investment officer who is not a family member.

In other words, for many family offices, especially smaller ones, the decision on which project to invest in is often in the hands of the family head.

How do dedicated investment firms operate? They usually have multiple specialized departments dealing in market management, due diligence and investment negotiations. “I can’t say that family offices lack professionalism, but their review processes are different from the rigorous systems used by institutional investors,” says Law.

For this reason, she believes that securing investments from family offices is comparatively easier. “Establishing connections with decision makers or gatekeepers of family offices might be more important than due diligence.” However, this doesn’t mean that getting investment from family offices is a walk in the park, or winning their investment guarantees would ensure ultimate success.

Although Beyond Ventures had support from more than 10 family offices at its inception, Man says seeking increased collaboration with more families isn’t on his to-do list for the short term. Normally, family offices would invest about $3 million, which, for venture funds with years of experience, falls short of meeting their needs. To expand their operations, funds like Beyond Ventures need larger investments from institutional backers.

Moreover, the investment strategies of family offices are often closely tied to how they generate their wealth. If a family office has its roots in I&T, it tends to favor investments in high-tech sectors.

Entrepreneur Wang Xing’s family office, for instance, led the Series-C investment for Li Auto — a leader in the Chinese mainland’s electric-vehicle market — with $300 million. When the EV maker was preparing for its initial public offering on the Nasdaq stock exchange, Wang doubled down with an additional $30 million to acquire roughly 5 million shares.

Wang himself has a background steeped in technology. He successfully capitalized on the tailwinds of China’s internet and mobile internet booms, founding Renren, a real-name social networking platform, and launching Meituan, which became the nation’s largest food delivery services provider.

In contrast, there are few family offices in Hong Kong that had made their initial fortunes in technology. The “four big families” of Hong Kong are largely from the real estate or industrial fields. 

Market factors

Equally important is the influence of economic cycles on the investment appetites of family offices. The investment willingness of Hong Kong’s family offices can be illustrated by a chart that resembles an inverted “V” shape. According to Man, it saw a sharp increase from 2016, peaked in 2021, and subsequently fell, but stayed above pre-2016 levels.

Man explains that, for many years, real estate has been the investment hotspot in Hong Kong. The rise of major tech players on the mainland had opened the door for family offices to the sector’s lucrative potential by 2016, giving a boost to their interest in related investments. But the recent bearish trends in the Hong Kong and mainland stock markets have made it difficult for venture investors to cash out through IPOs, dampening their investment enthusiasm.

Chiu believes the influence of economic cycles on smaller family offices is even more significant.

Unlike their European counterparts, which often have institutionalized investment arms honed over generations, most wealthy Hong Kong families are only from the second or third generations while, on the mainland, first-generation leaders of many families have yet to retire. This stage of development can lead to unstable investment structures and a limited ability to weather risks. Therefore, during economic downturns, these family offices would shy away from high-risk investments, such as venture capital.

However, “it’s during these economic recessions that startups and venture funds most need investments”, says Chiu. 

Long-term view 

While family office investments are important, it’s necessary for Hong Kong to cultivate more stable, large-scale and longterm funds to mitigate the impact of economic fluctuations on technology projects.

In his latest Policy Address, Chief Executive John Lee Ka-chiu announced the long-awaited establishment of a HK$10-billion ($1.29 billion) I&T Industry-Oriented Fund aimed at channeling more market capital into five subfunds that focus on emerging industries — life and health technology, AI and robotics, semiconductors and smart devices, digitalization and transformation, and sustainable development.

Chiu likens the relationship between such capital and investable projects to that of “chicken and egg” — it’s hard to say which comes first. “But this cycle has to get rolling somewhere.”

Besides governments, large global tech corporations have become an increasingly significant source of venture capital.

Shenzhen-based internet behemoth Tencent is dubbed “half a venture capital firm” by industry insiders. Since 2015, the company has invested more than 100 times each year, peaking in 2021 with over 320 investments, according to Chinese corporate information provider Tianyancha. Tencent

President Martin Lau Chi-ping said, by early 2020, the company had backed more than 70 listed firms and 160 unicorns —startups valued at $1 billion or more. Like Tencent, other tech titans, such as Alibaba, Baidu and Xiaomi, are also active investors on the mainland.

GV — the venture capital arm of Google’s parent company Alphabet — currently manages $10 billion in investments. According to its website, among some 400 companies it has invested in so far, 65 have gone public and 175 have been acquired or merged.

But Hong Kong lacks such large tech players. “The city must cultivate sizable unicorns that are rooted here and willing to invest in the next generation of tech companies and funds,” Chiu says.

Family office funding alone is insufficient if Hong Kong is to cultivate a robust I&T ecosystem, although it’s a growing source of backing for early-stage projects. A more diverse pool of long-term capital is still essential.

Contact the writer at irisli@chinadailyhk.com