Enter the Dragon (year): Predictions for family offices
There's no denying it - everyone wants a slice of Asia's rapidly growing family offices.
Expect that trend to extend into the Year of the Dragon.
In particular, the competition between Hong Kong and Singapore (not always acknowledged openly but everyone knows it's happening) to attract family offices will definitely continue, as Hong Kong government continues its marketing drive.
In early February this year, Invest Hong Kong's new director-general Alpha Lau said she expects the number of family offices in Hong Kong to "surpass those in Singapore in a few years."
Invest Hong Kong is the government agency tasked with attracting foreign investment.
While growing the number of family offices does burnish the appeal of a city's status as financial hub, the total assets these family offices bring and the quality of these assets also matter.
This especially matters given Singapore's recent anti-money laundering scandal that allegedly involved some single family offices, it's clear that bulding a family office industry requires more than just a 'feel good' number of family offices. Instead, the end goal should be about how these family offices can boost the local economy and create jobs.
That applied to all jurisdictions that are eager to woo family offices, including Dubai and Singapore.
EVOLVING INDUSTRY
We will also continue to see the family office industry consolidating in different markets to facilitate networking and knowledge sharing with a target of promoting healthy development.
In Hong Kong, the government launched the Hong Kong Academy for Wealth Legacy in November last year, with New World Development’s Chief Executive Officer Adrian Cheng as chair -- a move that won broad endorsement from industry heavyweights.
Over in Singapore, the Wealth Management Institute has been well established with the involvement of GIC and Temasek to provide education and research around the area.
While formal goverment entity-led institutions are one thing, family offices are also eager to 'team up' to form informal networking alliances.
AsianInvestor has spoken to family offices across Hong Kong, Singapore, Thailand and India and one of the common themes is that they are welcome to forming alliances with other family offices to learn best practices, sucession planning and explore investment opportunities with their peers.
Unlike other investor groups, family offices tend to be nimble and open to taking the initiative to arrange informal networking sessions -- after all, entrepreneurship and taking risks is how they earned their wealth and they aren't shy in looking out for their best interests.
Another interesting trend we could continue to see is more single family offices transforming into multifamily offices or enhancing their third-party asset management capabilities in the new year.
GEOPOLITICS
Amid a complex geopolitical environment, China and the Middle East are getting closer to each other, igniting more cross-border investment and business activities.
But in the private wealth space, such exchanges will take time. In 2024, we may be able to see the official announcement of one or more royal families – likely from Saudi Arabia - extending their investment operations by planting an office in Hong Kong.
Meanwhile, more Asian families are also looking at setting up a presence in the Middle East, especially in Dubai.
More Hong Kong and mainland Chinese family offices, single or multi-family entities, could also focus on building their capacities to invest in the Middle East, as the region is hungry for overseas money to diversify their oil-rich economies towards techology and other industries.
BROADER ASIA STORY
Even as the Chinese economy slows and its technology-related reforms enter a new era, a similar infrastructure upgrade and digitalisation are set to repeat in other parts of developing Asia, which is set to create more billionaires and stronger demand for family office services.
2024 could be the year when service providers in the family office universe expand operations from one or two offices in Hong Kong or Singapore, to multiple locations across the region to cover a wider customer base.
Among some family offices that AsianInvestor spoke to, some have turned more fee-sensitive and are exploring ways to get rid of multiple layers of fees of private banks, especially after the hit to the reputation of Swiss private banks following the collapse of Credit Suisse.
As the market grows, more established asset managers are expected to join the competition and expand their capabilities in private wealth management, while mature wealth managers in developed markets may also see Asia as ripe hunting ground.
Alternative investment giant Blackstone has been expanding its private wealth solutions team across Singapore, Shanghai, Hong Kong and Tokyo. Principal Asset Management is also ramping up its presence in Asia to capture the fast-growing private wealth management opportunities.
All in all, expect the Year of the Dragon to breathe some energetic fire into family office growth.