Where are Chinese family offices in Singapore investing?

As more Chinese family offices set up shop in Singapore, the city is fast becoming an important financial hub for their Southeast Asia investments.

According to Angel Chia, chair of the Family Office Association Hong Kong and founder-CEO of NexGenerator Pte Ltd, a family office accelerator in Singapore, Chinese investments in ASEAN are being made with the primary goal of generating profits, expanding business operations, or pursuing strategic business interests, in contrast to investments made for purely financial or speculative reasons.

“Most of the growth is driven by local incumbents including local business families,” Chia said. “Therefore, a more measured way to get involved by family offices tends to be through seasoned regional GPs or local family-sponsored GPs.”

Vietnam, Thailand, Indonesia, and more recently, the Philippines have attracted growing investment in domestic manufacturing, tech supply chain, and digitalisation, Chia added.

Meanwhile, new economy industries, propelled by accelerating digitalisation and decarbonisation trends from more savvy Chinese families have come into sharper focus, according to Manish Tibrewal, co-founder of multi-family office Farro Capital.

TECH SAVVY

The patriarchs and matriarchs from China are typically first or second-generation businesspeople who are still heavily involved in day-to-day operations. They also tend to be tech-savvy and display a keen interest in a wide range of innovative sectors, according to Tibrewal.

 “Given China's leading role in the electric vehicle revolution and their familiarity with green tech, interest [in] areas like batteries and solar energy is substantial,” he said. “Similarly, surging interest in artificial intelligence globally has seen Chinese family offices quick to leverage their vast networks and expertise to identify opportunities to deploy capital.”

“It's evident that cutting-edge sectors like green tech, artificial intelligence, biotech, and agritech are all areas they're watching closely, with allocations seeing a steady increase, reflective of ongoing global thematic trends and their belief in the transformative potential of these category-defining innovations.”

However, Timothy Chua, Chief Investment Officer at Winfield Global Capital, a fund management company providing family office services in Singapore, is seeing a more nuanced picture.

“Artificial intelligence is being used by Chinese family offices to further optimise their trading strategies and reap higher capital gains for themselves rather than food tech or green tech which perhaps takes a longer time to realise gains,” Chua said.

He also said there is less emphasis on ESG-related investments for Chinese family offices: “They are more focused on reaping higher returns within a shorter period for themselves, sometimes with the use of leverage as well, as compared to tackling more pressing social and environmental issues whereby returns are less straightforward and riskier from their perspective.”

REAL ESTATE INVESTMENTS

Chinese family offices have also shown a preference for investing in real estate.

Tibrewal of Farro said, “In real estate they prefer properties in Singapore, Australia, and the UK. Many of these acquisitions serve as primary or secondary residences for the families. This can be attributed to factors like economic stability, educational opportunities, and even opportunities to tap into new lifestyles in these regions.”

Winfield’s Chua said he observed a similar trend: “Within SG, they prefer residential, office & commercial real estate investments such as high-end condominiums, shophouses, office buildings, mixed developments projects as a form of investment.”

He has also seen them co-investing with counterparts to undertake development projects as financial backers, often in collaboration with local companies.

AsianInvestor recently reported family offices pivoting towards conservative asset allocation as concerns about market outlook linger and the risk-off impulse takes a grip on markets.

Chia of FOAHK explained Chinese families setting up in Singapore displaying a preference for public markets: “The primary objective for such set up is to achieve diversification in asset booking and tax residency jurisdiction. The subsequent investments are made generally to first satisfy relevant policy requirements, then to minimise asset volatility.

FLIGHT TO FAMILIARITY

“Unless the family already has experience deploying investments across public and private markets, public market investments with generally smaller ticket sizes, and much higher liquidity, would be the by-default preference for them, particularly considering a consensus impression towards a prolonged period of volatile asset returns,” Chia said.

Chua of Winfield has observed interest in public-market instruments that are higher risk and have higher returns.

“There is a preference for real estate and higher-risk, structured products that can deliver higher returns in the short term such as equity-linked notes, accumulators, stocks, FX, and CFD trading with additional leverage given by the banks or brokerage firms. In general, they prefer public markets which offer more liquidity, are easier to understand, and have lower counterparty risk as compared to dealing with private markets.”

Farro Capital noted Chinese family offices have shown interest in real estate and public market opportunities in the US and Hong Kong: “This is not to say they are averse to private markets, but the inclination towards what's familiar has a strong influence.”

At the same time, “many ultra-high-net-worth clients Farro engages with often possess significant concentrated ownership in domestic private equity, usually attributable to their ownership of operating companies in mainland China, according to Tibrewal.