UBS sees Singapore shine amid rise of region's family offices

Singapore

SINGAPORE as a wealth centre is gaining ground at a surer pace, capturing the rise of South-east Asia's new companies and more family offices setting up in the region, said a top executive from UBS on Wednesday.

It comes as UBS Asia Pacific hit a record high in the first quarter of 2021, with pre-tax profit up 21 per cent to US$900 million.

This sum is close to the pre-tax profit of US$1 billion for all of 2019, said Edmund Koh, president of UBS Asia Pacific, at a media briefing on the bank's results in the region.

Singapore is more quickly soaking up new money. As an indication, latest figures from UBS showed that the portion of new assets booked in Asia Pacific is split 50:50 between Singapore and Hong Kong - the two wealth hubs through which UBS book flows.

Five years ago, that split was 75 per cent through to Hong Kong, and 25 per cent through to Singapore.

But Mr Koh said that this performance reflected Singapore's status as a wealth management hub, and "absolutely not" because of issues related to Hong Kong.

This comes as the Republic has benefited from the "phenomenal" wealth growth coming from new companies in South-east Asia. In particular, Mr Koh pointed to the family office unit as "big business" for the bank.

Family offices make up less than 5 per cent of its wealth management clients in Asia Pacific, but they are expected to bring in about 30-40 per cent of invested assets.

This jump in family offices in South-east Asia is in part due to the availability of investment opportunities, which he said are "far more reasonable" in terms of value compared with China today.

All in, the overall growth speaks to the broad rise of Asia. Net new money more than doubled year on year to US$13.7 billion, with about 30 per cent coming from Greater China.

With UBS Asia Pacific growing at a compound annual growth rate (CAGR) of 21 per cent in profit and 17 per cent in invested assets in the past five years, the aim for the bank is to grow the business to at least two times the gross domestic product of the region, said Mr Koh.

The Asia Pacific region has grown in importance for UBS, making up about 37 per cent of the group's profit before tax. This has ballooned from five years ago, with Asia Pacific's contribution then at 12 per cent, said Mr Koh.

In the first quarter of this year, overall invested assets at UBS also grew 40 per cent to US$761 billion to hit an all-time high. Wealth management, which accounts for slightly more than half of UBS Asia Pacific's profit before tax, saw a 42 per cent jump in invested assets to US$576 billion in the first quarter.

While UBS as a group took a US$774 million hit in the first quarter due to the Archegos Capital Management fallout, Mr Koh said that Asia Pacific was not impacted.

He noted that it is common for a family office to require prime brokerage, but the bank has not experienced such "high prime brokerage requirement" for this part of the world as seen in the Archegos case.

Mr Koh said that the bank has always insisted on greater transparency in the family offices that they work with.

"Archegos is just one of those things that happens once in a while in the financial industry - it's most unfortunate, but it happened," he said, adding that the group CEO Ralph Hamers has already given his views on the matter and that the group is reviewing the episode.

Mr Koh emphasised that even during the thick of Covid-19 last year, the provisions that the bank had to make for the Asia Pacific region was US$10 million. For every dollar of credit line that was given in Asia Pacific, the utilisation was only one-third, he said.

"Are we overly conservative? No, I think we are appropriately risked," he said. "And we know our clients very well - our clients in Asia Pacific are very well-diversified, both in terms of long term investment in mandates, in leverage, as well as transactional opportunities."

Mr Koh said that the bank will also focus on environment, social and governance investment trends, the new economy with a key focus on tech unicorns such as Grab and Tokopedia, and transaction capabilities.

UBS also announced on Wednesday its official move into its largest Asia Pacific office in 9 Penang Road, Singapore, bringing together its over 3,000-strong staff from wealth management, investment bank and asset management. They were previously spread out across One Raffles Quay, Suntec City and Command House.

The 381,000 square feet property is home to UBS' first global Cyber Fusion Center, which combines information security and technology to mitigate potential risks for the bank and its clients.

It is also the Asia Pacific headquarters for its Evolve Innovation Hub, which focuses on generating insights using analytics and creating new products to meet clients' needs.

The new office was designed with sustainability in mind, with operations in Singapore run on renewable energy and electric vehicle charging stations provided.