The island state’s family office industry is expanding fast. Yet multi-family offices are also getting larger as they offer a better quality of service and gain critical scale.
A shift towards greater size, breadth and quality
Singapore’s status as an Asia gateway for the world’s wealthy families is growing. Earlier this year, it was reported that Google co-founder, Sergey Brin, is opening a family office in the island state, joining other well-known names such as British inventor James Dyson and China’s soup restaurant tycoon Shu Ping, who have also moved assets to the island state.
These famed wealthy families are the tip of the iceberg. Singapore is attracting less well-known individuals, too, in addition to the homegrown wealthy from Southeast Asia. The result? Buoyant conditions for multi-family offices (MFOs), as well as other firms catering to the wealthy such as accountants, lawyers and private banks.
Singapore’s rise as a financial centre for the elite is creating a virtuous circle. As new wealth arrives from China, Europe and the United States, so it requires an increasingly sophisticated range of services. That, in turn, is leading MFOs and other service providers to offer a broader range of investment products and wealth management services.
“Family offices are definitely very much more developed in the Western world,” notes Noah Kan, Group Head Intermediaries South East Asia at Julius Baer (Singapore). “I think with experienced specialists coming over to Singapore, this does bring their knowledge, their strength, their ways of how to structure the framework around a family office.”
Wealthy families are attracted to Singapore by the island’s political stability, as well as a constructive regulatory environment and a highly developed network of service providers. For instance, the Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (ACRA) launched the Variable Capital Companies (VCC) framework at the beginning of 2020, which has been well-received as a new corporate structure that is flexible and cost efficient for investment funds.
With the Asia Pacific region’s economic growth far outpacing the West, wealthy individuals are also attracted to Singapore as a gateway for investing in the region’s flourishing businesses and deepening capital markets. Therefore, they are looking beyond normal investment vehicles to private equity or venture capital funds.
There are an estimated 200 single-family offices managing assets of about US$20bn, Senior Minister Tharman Shanmugaratnam said in October 2020. The number of MFOs is harder to gauge, but probably in the region of 100-150.
In order to offer the breadth of services required, there is a noticeable trend of MFOs and other financial advisors working for these families becoming larger. Additionally, this helps them to attain the scale to cope with greater costs such as the expense of regulatory compliance.
Rising quality and consolidation
“It’s not just your senior banker who manages assets of US$50 million to US$ 100 million, and he wants to set up his own company anymore,” explains Kan. “Now you’re seeing not just bankers; you’re also seeing experienced fund managers and investment specialists coming out and setting up in the multi-family office space.
“So I think the quality has definitely increased. I think we will also see some consolidation, leading to a growth of much bigger multi-family offices, who would also require a heightened level of services from the industry, and private banks would be included in that.”
What MFOs want from private banks includes access to markets and access to brokers, as well as the broader range of services they are likely to increasingly require, including wealth planning and private markets investments. There is also a trend towards having better technology for managing and monitoring portfolios.
“After a good number of years of servicing this industry in Asia, Julius Baer prides itself on providing the solutions needed,” says Kan. “I think MFOs are also focusing on how they can use technology to help them in managing clients’ activities. That is something we are currently upgrading. We understand the industry’s requirements and want to contribute to its growth.”
Kan anticipates that the industry’s expansion will continue. But as it does so, more large MFOs will emerge, even as some single-family offices expand to manage the wealth of others.