Political tensions, Covid-19 hasten wealth flow to Singapore
Regional political turmoil and health and economic concerns caused by the Covid-19 pandemic have prompted more wealthy families in Asia to set up primary or satellite family offices in Singapore.
According to the Monetary Authority of Singapore (MAS) website, assets managed by single-family offices have risen an estimated five-fold from 2017 to 2019. Earlier this month, Singapore’s senior minister Tharman Shanmugaratnam, who is also the minister in charge of the MAS, said in a written response to a question in parliament that about 200 single family offices manage around $20 billion of assets in the city-state.
The number is an estimate because the MAS does not track SFO operations. In Singapore, SFOs are not required to be registered or licensed by the financial regulator, given that they do not manage third-party monies.
Political uncertainy has helped underpin this rise, particularly in Hong Kong. Wealthy families based in the rival financial centre have had to navigate a less predictable political and legal environment following the introduction of the city’s national security law, which has given China a great deal more sway.
These concerns have led some wealthy families to shift some of their wealth down to Singapore.
“Wealthy families are unlikely to put all their eggs in one basket and many are actively look to diversify their assets globally,” said Sean Tan, the business development manager for Raffles Family Office. “Both Singapore and Hong Kong continue to be highly regarded as leading financial and business hubs and remain high on the list of family offices,” he said.
The MAS was at pains to state that fund inflows did not originate solely from its rival financial centre. In a statement on June 7, the central bank clarified that the growth in foreign currency deposits in Singapore "has come from a variety of sources – domestic, regional, and beyond the region. No single region or country source dominates".
In the same statement, it said total foreign currency non-bank deposits in Singapore’s banking system stood at S$781 billion ($576 billion) at the end of April this year, 20% higher than a year ago.
Cheong Wing Kiat, the chief executive of Business Concept, a Singapore-based single family office and advisory firm, said the number of family offices that have set up shop in Singapore has “definitely” increased this year, partly because doing so gives them more diversity from a multitude of political and regulatory risks in the region.
“It is good to have a base here [in Singapore], whether it is a satellite unit or a headquarter office,” he told AsianInvestor. “It seems that Singapore is the biggest gainer from the China and US trade conflict and the pandemic. In Taiwan, the situation is a bit sensitive; Hong Kong has a lot of things still to resolve; Japan has immigration restrictions, and while Korea may also be suitable, it isn’t as focused on wealth management as Singapore.”
SKILLS NEEDED
Wealthy families in Asia are also seeking a safe haven to ensure their physical well-being, Cheong added. Singapore has one of the lowest global death rates from Covid-19.
Noor Quek, the founder of NQ International, a Singapore-based multi-family wealth adviser, agreed that the pandemic has prompted many Asia-based family offices to re-evaluate their structure and their risk profiles.
“If their investment interests are outside [their residence], they need to have a financial centre as a holding office. Singapore is ideal in many ways as it has peace, stability and a good regulatory environment,” she said.
She added that several wealthy individuals have established family offices in the city state as well as Hong Kong in an effort to diversify investments and access more talent and services, but did not provide details.
The rising demand for skills and knowhow to support Singapore’s expanding family office sector has caught the attention of the local authorities.
The Institute of Banking and Finance Singapore (IBF) and the MAS on July 27 launched a “skills map” for family office advisors to deepen their skillsets to serve Singapore’s growing family office sector. “The launch of the Family Office Advisor Skills Map is timely and will further propel efforts to lift our family office capabilities to a new level,” MAS said in the news release.
Singapore’s family-office sector is growing in tandem with a rising number of global institutions setting wealth hubs in Singapore. Citi said last month it would be opening its largest wealth advisory office globally on Singapore’s Orchard Road.
Billionaire Ken Griffin’s Citadel finance companies reportedly also plan to open a Singapore this year. China wealth manager Hywin is seeking licences to provide wealth management, asset management, succession advisory, insurance and brokerage services in the city-state, according to a Bloomberg interview.
DUAL APPEAL
Despite Singapore’s recent ability to attract more family office, Raffles Tan believes Hong Kong will continue to rank alongside it when it comes to attracting the region’s wealthy families and driving the growth in family offices.
The city has been facing increased social and political instability for over a year, courtesy of both protests and the imposition of the national security law. However, the territory’s status as the main gateway to and from China is indisputable, “given its geographical proximity and historical background,” Tan said.
Raffles Family Office has offices in Hong Kong, Singapore, Taipei and Shanghai and is rapidly expanding in the region.
In Hong Kong, plans are also underway for a wealth management Connect system linking the Greater Bay Area and Macau. The Securities and Futures Commission (SFC) issued guidance in September to clarify the licensing requirements for family office operators.
A single-family office, depending on its structure, generally does not need a licence from the Hong Kong financial regulator. However, should the family offices be run as an asset management business by accepting fees to invest for several families or from other investors, it will need to get a licence from the SFC.