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Taking charge of the family's wealth
MOST scions of ultra high net worth families are set for an executive role at the helm of a family business or even at large listed corporations with substantial family-held interests.
ARA Asset Management co-founder and group chief executive John Lim, however, believes his son Andy should carve out his own place through the JL Family Office, the holding company for the family's wealth. Mr Lim was estimated by Forbes to have a net worth of US$780 million as at 2018, a rise of more than 50 per cent from the 2016 estimate of about US$500 million.
The main assets of the family office are its 20 per cent shareholding in ARA, whose assets under management more than doubled from about S$35.6 billion prior to its privatisation, to just over S$80 billion today. It also holds a 10 per cent stake in Straits Real Estate, which is co-owned by The Straits Trading Company Ltd.
Says the elder Mr Lim: ''Over time my family now owns 20 per cent of ARA; maybe ARA is in the S$3-4 billion range in market capitalisation. Twenty per cent is a lot. We need a professional to run it. I asked Andy - are you ready to run it? … The family office needs to be properly organised and structured so you don't create confusion among the generations. We read terrible stories about what happens when founders pass away. It's better to start with a proper structure.''
''ARA is not a traditional family business. I don't want him to run ARA. He may be a director but let the professionals run it. I run ARA because I started it. If he comes in it will take him 20 years to become CEO.''
Mr Lim himself founded ARA at age 45.
''He should run the family office and take ownership of growing the family wealth; that's how I see it. ARA is a subset of the family wealth. If he runs ARA he will forget about the family wealth. He might as well run the family office where we own 100 per cent of many things.''
Says Andy Lim, executive director of JL Family Office: ''This year we decided … to see what we can do to diversify our family wealth beyond ARA and real estate. We thought it was opportune. We're an active investor, not investing just in passive positions like funds and stocks. The bulk of our holdings will be operating businesses. Now it's my job to find businesses to add to our ecosystem, and explore what we can do to grow our family pie.'' The office is looking into healthcare related investments.
ANDY obtained a law degree from the University of Liverpool and began work at Allen & Gledhill in 2010. That was when he cut his teeth - albeit indirectly and from the outside - on the ARA business. ARA was one of his clients. ''I found myself becoming more and more interested. People who used to work for (dad) used to tell me war stories. I'd go home and ask him.'' In his childhood and teens, he had ''no clue'' what his father did for a living. ''I always asked my dad - so what do you do? He'd just say businessman. He never told me he was in real estate. That's my dad's style; a very traditional businessman.''
After five years at A&G, Mr Lim approached him with the idea of joining the family office, which was set up in 2011. The office now employs fi ve people, mainly in finance. Andy has set about professionalising the investment process, to inject greater governance and oversight. Investment proposals, for instance, must be formalised in a memo. The office is set up as a company, and not as a fund management firm as some family offices are, as the intention is to invest in operating companies.
''I've been training in the business world for the past 10 years. I'm ready to take on this new task of helping the family diversify its wealth... The benefi ts of ARA's privatisation have come through. It has given us a runway to grow quite quickly. What should we do next to complement this growth?
''I'm just a steward of this wealth. The family office aims for wealth preservation but by continuing to grow with new businesses. If you are a passive investor buying bonds, that has its strengths, but you start to be removed from industries. We want to use our growth to give back to Singapore.''
His first task for the family legacy was actually in his university days, when his father asked him to set up a foundation to channel the family's charitable gifts. ''There is no guidebook on starting a foundation. We learnt on our own. We knew we wanted education... My dad always felt that if not for education, he wouldn't be who he is today. It's the greatest multiplier.''
The Lim Hoon Foundation - named after Mr Lim's father who was a teacher - was set up as a charitable trust in 2008 to support university education among low-income families. The segment the foundation has chosen to benefi t comprises average students who are low-income but would not qualify for most bursaries and scholarships that target straight-A students.
Mr Lim says: ''I want to make sure it's a scholarship people want to be associated with because it has real benefi ts to their lives. We don't give prestige scholarships. I want to help the average, needy students. As long as they pass the entry exam of universities and they come from poor families. We call this the sandwich class. I find it pitiful that the sandwich class doesn't qualify for subsidies. They don't know where to go and end up without proper education, and they can't enhance their lives. Our scholars are humble, hardworking. They help each other.''
TO DATE, the foundation has awarded 33 university scholarships under the ARA-LHF Scholarship and close to 970 bursaries under the LHF Community Education Awards. It hopes to build a community where scholars and their families can help each other, and pay it forward. Andy says: ''The only thing we ask is for scholars to give back in any way they can.''
Andy is keenly aware of his father's legacy, particularly his business acumen and ethos. ''His entrepreneurial spirit rubs off on people, especially his business and investment philosophies. Over the years, without giving me lessons, he has taught me what it means to make certain decisions.
''In his philosophy, every time you make an investment, you have to take into account all stakeholders - your staff, shareholders and business partners. If you do that, sometimes things don't work to your benefi t. But in the long run it all works out.
''My dad takes risks in a very considered manner. He doesn't go for broke. Some people need to triple or quadruple their wealth every fi ve years. My dad does enough to grow the wealth step by step.''
Investment propositions for the family office must be approved by Mr Lim. Says Andy: ''Sometimes I would do an investment memo. He would see very quickly that something was not right. It may be something outside of numbers, maybe the people are not right. Nine times out of 10, he would be right.'' On the next step for the family office, Mr Lim says: ''My advice is let's not be too aggressive. You can enter into a business and get disrupted very quickly. Technology hits so quickly, but a business takes time to build... We need to be mindful of the technological evolution versus the physical environment.''
JOURNEY OF AN ENTREPRENEUR
JOHN Lim, co-founder of ARA Asset Management, is among Singapore's wealthiest. But his roots were humble: He lived in public housing; his father was a school teacher.
He worked for 20 years in real estate for firms such as DBS Land and GRA (Singapore) before he set up ARA at age 45. The rest, as they say, is history. His beginnings meant his children also grew up in public housing, an aspect that his son Andy, 34, says he is grateful for. A younger brother Ken, 27, is completing a business degree in Melbourne.
''We grew up in HDB and then moved to a condo. I saw my father build his career from nothing. He always had a decent job. We were comfortable but I didn't get everything I wanted.
''One of the blessings is that I got to see this journey, to see how tough it was to create this wealth. Some of the changes in our lifestyle were hard earned. Dad spent most of his life climbing this ladder.'' The elder Mr Lim, 63, says he is often asked when he would retire. ''I tell them I retired 10 years ago. My defi nition of retirement is the day I have no worries about fi nances and income... and I don't need to work for my paycheque. I can focus on real things and the many things in life I want to do.''
He and Andy worry, however, about the impact of the wealth on the third generation. Mr Lim says: ''The second generation ... took MRT to work, fl ew economy class. The challenge is the future generation, brought up in an environment where they are so comfortable. When you suddenly have big money you lose sight of the value of money.
''That's my worry, which Andy and I talk about. How can we make sure that his children are properly brought up? They are chauffeur-driven, have maids and all the toys they want.'' He notes the lively entrepreneurial scene today where startups manage to fetch valuations in the millions of dollars, buoyed by the availability of private capital. Founders sell and move on to the next start-up. He laments that they actually fail to build wealth.
''Many entrepreneurs never really build a business. They make S$1 million to S$2 million and quickly sell it and do another start-up. When I started ARA people wanted to buy the company for S$20 million. I really wanted to sell; S$20 million 20 years ago was a lot of money. At S$200 million (value) people also wanted to buy and of course I wanted to sell. At S$400 million I also wanted to sell. Finally we decided to IPO at S$700 million. When we privatised it was worth about S$2 billion. I feel sad for the younger generation. Not many see their startups all the way through.''
Fear of failure, he says, spurs him to excel. ''The way to overcome failure is to work harder and more prudently. Of course the bigger the company the harder it is. With ARA's globalisation, can we guarantee success? Is it possible to fail? Of course. But at worst, we'd go back to the original scale and protect our downside. Fear of failure is always there. It's a matter of overcoming it and building the business. That's the real test of an entrepreneur.''