Singapore sees jump in family offices as Asia's ultra-rich set up camp

Singapore

MORE affluent families have flocked to Singapore as a base to park their wealth in the midst of a worldwide pandemic last year, with the Republic's safe haven reputation a firm draw especially for the well-heeled hailing from North Asia.

Details have been scant on just how many there are in Singapore. But now, data analysis firm Handshakes estimates that 221 single and multi-family offices opened in Singapore last year.

This is up from 129 in 2019, and 22 in 2018. In 2017, only eight family offices were set up here. Handshakes derives these figures by studying data from the Accounting and Corporate Regulatory Authority (Acra).

These likely capture flows from outside of Singapore. As an indication, the proportion of foreign directorships of these newly set up family offices has risen slightly over the years to stand at 55 per cent in 2020. This is up from 51.6 per cent in 2019 and 48.6 per cent in 2018.

And among them, those hailing from North Asia dominated the list in the last three years - the proportion of foreign directors from that region was 27.3 per cent in 2020, compared with 22.2 per cent in 2019 and 17.1 per cent in 2018.

Handshakes data refer North Asia to mainland China, Taiwan, Hong Kong, Macau, South Korea and Japan.

Directors are not necessarily the key decision makers or wealth owners in the family office as employees can be included among the directors in some cases. But it is still one sign of Singapore's burgeoning appeal for the affluent from North Asia.

Morten Bennedsen, Professor of Economics at INSEAD and The André and Rosalie Hoffmann Chaired Professor of Family Enterprise, described a family office as the main financial and tax institution that takes care of a family's interest.

While the family office does what the family delegates to it, from planning the education of children to succession planning, it usually specialises in tax planning for the family and investment of the family's non-corporate wealth, he noted.

Singapore's draw is a confluence of many factors, with some key ones being its favourable tax rates, stability, rule of law, ease of doing business, education and healthcare.

This is against a backdrop of Asia's ascent and the wealth creation in the region. Asia now accounts for the highest number of ultra-high-net- worth individuals in the world.

Family offices are gaining traction in recent years mostly due to the desire of wealthy families to institutionalise and diversify their investment programmes, said Jason Nelms, a partner specialising in fund formation at law firm Morrison & Foerster.

As such, family offices tend to hire experienced investment professionals to run the business, similar to how a third-party investment fund would run, he noted.

Professor Bennedsen cited political risk and the lack of secure property rights in China and Hong Kong as plausible reasons for the affluent to move some of their wealth and family to Singapore.

"This is of course accelerated by the difficult situation in Hong Kong that has triggered the exodus of many wealthy families," he added, referring to the off-and-on civil unrest that has engulfed Hong Kong since 2019.

Cheong Wing Kiat, founder of Singapore-based family firm advisory Business Concept, said that many of these wealthy families from Asia are not fixated on tax incentives. They are more interested in buying property, diversifying their wealth and having the option to live here.

"If you are rich and wealthy in China, you want to keep a low profile, so it's about secrecy and safety," he said. "A lot of these wealthy people quietly come to open an office to park money here so that they do not need to manage it in China - the important thing for them is that nobody knocks on their door."

There are legitimate reasons for this. Some of the affluent just do not want attention drawn to their money and so look to Singapore as a country where their privacy and investments can be protected, he noted.

Christine Li, head of research, Asia-Pacific, at Knight Frank, said that while properties can be bought by the affluent without a family office, it is easier to buy a property under certain existing trust structures, which can also mask the identity of the buyers.

She added that globally, the property consultancy is seeing an increased allocation to physical real estate for diversification among the ultra-rich, and some of this is carried out through family offices.

And while Singapore does not allow dual citizenship, opening a family office here opens the door for wealth owners to apply for residency, allowing them to move here in times of crisis, either due to social unrest or health reasons like Covid-19, said Business Concept's Mr Cheong.

He pointed out that while Hong Kong is traditionally where the wealthy in China would park their funds, the social unrest there has led some to look for alternatives.

The US-China trade war, in particular, has resulted in many uncertainties in the region, nudging some of the affluent to turn to Singapore, said Mr Cheong.

Still, Morrison & Foerster's Mr Nelms said that both Hong Kong and Singapore benefit from each other's success as the relationship is "symbiotic". "Both cities will continue to present compelling opportunities for family offices and other global investors," said Mr Nelms.

"Asia's markets are so diverse and dynamic that no one city could dominate the landscape."

While North Asia tends to hog the limelight, wealthy families with a family office here hail from other regions too. In 2020, 8.5 per cent of foreign directors came from Europe, while 7.5 per cent came from South-east Asia, according to Handshakes data.

This year, the family office of Google co-founder Sergey Brin set up a branch here, as did hedge fund billionaire Ray Dalio. They are both Americans. James Dyson - who makes money from high-end vaccum cleaners and hair dryers - also has a family office here. He has since reportedly switched his Singapore residency back to the UK.

The study is part of the BT-Handshakes Data Series, a collaboration between The Business Times and Handshakes to provide insights on various business sectors of Singapore using data from Acra.

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