Family Offices in Singapore Growing in Quantity and Quality
As part of our continuing series of articles, started last week with “It’s All in the Family Offices in Singapore” (https://finexhongkong.com/its-all-in-the-family-offices-in-singapore/) focused on Singapore’s rising family offices, we take a deeper dive into why there has been an explosion of both numbers and sophistication in these entities in the City State.
With the increasingly uncertain macro-economic environment and geo-political unrest, coupled with global investors looking for improved market safe havens and attractive tax incentives, Singapore has emerged recently as a top location for establishing these family offices. According to the Monetary Authority of Singapore (MAS), the number of family offices here jumped fivefold between 2017 and 2019, and almost doubled from 400 at the end of 2020 to 700 a year later.
Earlier this year, the MAS announced stricter criteria around local investments, business spending and asset management for family offices to qualify for tax incentives. These requirements by this regulator essentially hastened the need for increasing professionalism within the family offices as they will need to hire more full-time experts, invest in technology, risk management and governance.
According to a Citi Private Bank’s Fang Ong’s recent article in the Business Times, “On top of that, we see three key trends – private capital markets, sustainable investing and philanthropy – to watch as the industry here is poised to develop further.”
Ong continues further, “We expect increasing interest from family offices in exploring private deals, including private equity and private debt as well as investing in Series B and beyond plus pre-initial public offering (IPO) rounds, due to increased turmoil and volatility in public markets and higher uncertainty in a rising interest rate environment.”
Moreover, she continues, “According to last year’s global family office survey by Citi Private Bank, the allocation to direct private equity and debt investments continues to increase substantially. Around 44 per cent of all family offices respondents reported that over 25 per cent of their portfolio was assigned to direct investments.”
In previous generations, wealthy families also preferred to earmark wealth creation and philanthropy separately. In recent times, with the passing of the proverbial leadership torch to their younger inheritors, a more holistic approach is being adopted to combine impact investing, namely ESG focus, with portfolio value creation. Finex HK discussed the recent rise and change in ESG focus in our earlier article this year titled, “ESG Investing in SEA: Is Green Turning Brown?” (https://finexhongkong.com/esg-investing-in-sea-is-green-turning-brown/)
Ong again cites, “Results of a recent survey by the Family Office Association Hong Kong show that 85 per cent of family offices are expected to raise their allocation to ESG (environmental, social and governance) or impact investing. Among this group, 64 per cent expect an allocation increase of more than 10 per cent, with the remaining 36 per cent planning an allocation increase of over 20 per cent.”
Clearly, it is becoming quite apparent that Singapore’s rising family offices will continue to evolve in their sheer numbers and sophistication in the coming years. Many in the industry predict that this evolution will mirror the size and complexity seen in other more mature family office markets, like the US.
Finex HK has one of the largest teams of 20+ associates dedicated to serving the family offices in Singapore and SEA markets. We are actively working with both GPs and LPs to help raise capital in this rising market.