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Impact Investing

IPE special report May 2018

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A hot bed for family office activity

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Singapore is a popular financial destination due to its business- and wealth-friendly tax environment.  It is also an island nation that draws a lot of tourists and vacationers as well as wealthy individuals looking for an international hub that is both attractive and enjoyable from which they can conduct their business

The island nation has the ninth highest concentration of ultra-high-net-worth households that have over $100m in AUM, according to the Boston Consulting Group. Singapore is perhaps the most vital access point to high net worth families due to its high proportion of wealthy households and its proximity to other key locations like Hong Kong, Tokyo and Taiwan. Singapore’s status as Southeast Asia’s financial and high-tech centre has also drawn a great deal of wealth and investment to the country and this has, in turn, led to a wealth management solution: family offices.

The family office concept, once almost exclusively available to the wealthy families in Europe and the US, is quickly migrating to new pockets of wealth in places like Brazil, Australia and Singapore.  Only a few years ago, a wealthy family or ultra-high-net worth individual would be hard pressed to find a customised family office wealth management solution; now, there are dozens of family offices operating in Singapore and the number of single and multi-family offices is only expected to increase in the coming years.

As the amount of wealth in Singapore has steadily grown, so too has the need for family offices.  Asia is, of course, a region of great wealth and Singapore is one of the wealth capitals for the region.  It is estimated there are 17,500 ultra-high net worth individuals in Asia and the region accounts for 18.5% of ultra-high net worth individuals in the world. Singapore serves as one of two primary hubs for Asian family offices - the other being Hong Kong. Singapore has developed a reputation among the high-net-worth community as a financial capital and a popular destination for wealthy families, so many family offices have established offices in the country to service local families and individuals.

Accordingly, the number of family offices in Singapore is growing; however, many high-net-worth individuals and wealthy families have relied less on typical single family offices in favour of a different model. One study by VP Bank found that wealthy Asian families turn to “a plurality of players that are independently (e.g. global banks) or collaboratively (e.g. asset managers, lawyers and in dependent advisors) providing family office services for wealthy Asian clients … these structures work as a dynamic network of different players’ discussed as a ‘Hybrid network Family Office Model.”Yet, as single and multi-family offices gains traction among the Asian investment community, we expect Singapore to fully embrace the more traditional family office model.

Why Are We Focused on Singapore?

Wealth accumulation has steadily increased in Singapore from a low point in 2001, along with the number of family offices. The country has a high concentration of billionaires compared to other Asian countries, making it a very attractive destination for family offices. The number of high-net-worth individuals in the country is estimated to be 60,000 although that number has likely grown since.

As one report on Singapore family offices concluded: “Even if only a few family offices are identifiable in Singapore today, the market will clearly play an important role in the family office business for Asian clients in the future.” According to Singapore-based hedge fund manager Anson Zeall Partner at Stoxster Capital LLP there is a continuous rise in money flowing into the area, which is fuelling demand for family offices. 

In my most recent trip to Singapore, I saw mounting evidence that Singapore is on the cusp of a surge in the local family office industry. For one, there are already dozens of family offices working in Singapore and has made the concept more familiar to Singapore and Southeast Asia’s wealthy, laying the groundwork for future family office growth. Furthermore, I met with several family offices considering or actively establishing an office in Singapore because they, too, see the huge growth potential in the region. 

You can see other signs of this coming boom by the number of family office and wealth management conferences in Southeast Asia and Singapore and the number of hedge funds and private equity firms setting up new offices to service clients in the region. I am constantly talking to hedge fund and private equity marketers who are eager to find new investors for their funds and yet few have a clear strategy for targeting family offices and even fewer have a specific plan for raising capital from Singapore investors.  The fact that investment funds are undervaluing Singapore is not atypical; for years, investors in Singapore and, more generally, Asia, have been underserved and overlooked in favour of investors more local to American and European funds.  However, this trend is reversing as forward-thinking hedge funds and private equity firms realise the potential in Singapore and Southeast Asia.

Richard C. Wilson is the founder of the 40,000+ member Family Offices Group association, and author of the Family Office Book: Investing Capital for the Ultra-Affluent.

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