UAE beckons as secondary base for family offices in Asia, Europe
Family offices from Asia to Europe are eyeing the United Arab Emirates as a second base for investment and other family operations, a family office industry executive and former family office CIO told AsianInvestor.
“The UAE is conveniently located between Europe and Asia and helps both regions by being a kind of connectivity corridor,” said Adam Ladjadj, chairman of the Emirates Family Office Assocation headquartered in the UAE capital of Abu Dhabi.
“One of the reasons why some European or Western family offices set up in the Middle East is to explore opportunities in markets like Southeast Asia, while Asian family offices explore UAE as a base to potentially reach out to Europe," he noted.
Until early 2023, Ladjadj was also CIO of the family office of a member of the Abu Dhabi ruling family and with the association, and remains an influential presence in the rapidly emerging family office landscape in the Middle East.
Emirates Family Office
Association
He acknowledged there has been strong interest from family offices in Asia about the Middle East.
“There has been quite a lot of interest from Hong Kong and Singapore [regarding setting up family offices],” he said, although he did not provide further details.
Singapore family offices have told AsianInvestor they see scope to set up an operational base in the Middle East.
At the same time, Middle East family offices have been increasingly eyeing investing in Asia, spurred by the interest of large sovereign wealth funds and institutional investors from the UAE, Saudi Arabia and Qatar in this part of the world.
Cross-border investment activity from the Middle East to Asia has gained momentum, with total cross-regional private capital deal value climbing to $83 billion since 2020, compared to $14 billion from 2016 to 2019, according to Global Private Capital Association.
MID-EAST BASE
As a highly experienced family office investor himself, Ladadj says there is lot of development in the family office space and many wealthy families both within the country and outside are keen to set up office operations.
“Many family offices see Abu Dhabi and the UAE as a hub that is on par with where they are, and they do see it as a second and third location where they need to have a presence,” he said.
They see the association as a way for them to ‘test the waters’ of establishing a presence in the UAE, he noted.
“Also, importantly, establishing a physical presence is important. In the Middle East, we still place a lot of importance on meeting people face to face and cultivating relationships,” said Ladjadj.
More family office structures such as trust and foundations are being set up in the UAE, Ladjadj noted.
“They are being created to make the families’ operations more efficient,” he said, adding that more families are keen to separate business from family wealth.
The EFOA hopes to bring together more experienced family offices which are possibly in their fifth or sixth generation with relatively new entrants.
The association wants to be the platform via which the more established entities offer guidance to newer family offices on how they faced different pain points, overcame challenges and what solutions helped.
“Families like to work with other families because there are often several common interests; otherwise, very often, families tend to talk to industry or sales experts, which can be interesting but not always aligned with the family office’s interests.”
That’s a view endorsed by other single family offices: the head of investments at a Thai family office also pointed out the families like to network and partner with other family offices when they scope out investment deals.
Image credit: Shutterstock
PUSH TO ATTRACT WEALTH
The EFOA’s two main goals are to help with wealth preservation and promote international connections -- and connecting with Asia is expected to play a growing role in EFOA’s activities in the months ahead.
Dubai, like Singapore and Hong Kong, is regionally known for its beneficial regulation and legal stability which, makes it an attractive place for regional or international family offices to relocate.
“The new Dubai International Financial Centre (DIFC) Family Arrangements Regulation [in 2023], allows family offices to operate without registering with the Dubai Financial Services Authority (and therefore without disclosing their common ancestor’s name or source of wealth) may make Dubai even more attractive for regional and global families wishing to relocate,” a recent report on fundraising by family offices by alternatives data provider Preqin.
Abu Dhabi, with its international financial centre Abu Dhabi Global Market, is also making a big push to attract family offices.
The UAE also offers a tax-efficient environment with no estate, inheritance, personal income or capital gains tax, enhancing its appeal for family offices.
in the UAE. Image credit: Sorbis / Shutterstock.com
TECH TRENDS
Family offices in the Middle East have grown rapidly, with total assets under management (AUM) forecast to hit more than $500 billion by 2025, according to research by Agreus Group, a consultancy that works exclusively with family offices.
While property investments have been the mainstay for older generations of family offices, the next generation is very interested in technology, both as an investment target and to improve the internal process and operations of their family offices.
"To some extent, with the new generation, technology is definitely the new real estate,” said Ladjadj.
The Middle East has been successful in attracting a lot of technology companies, whether they be startups or those in the growth stage or those ready for an IPO.
Saudi Arabia and the UAE are the two big start-up destinations pulling in the most money in the Middle East, even though venture capital funding regionally and globally experienced a decline in 2023.
Many family offices see technology as a growth avenue and want to partner with these companies and also consider investments in such companies as part of an expansion strategy, said Ladjadj.
Still, they also have a desire to stick to their roots or legacy and that is, more often than not, real estate, he added.