“Family Office” is the latest buzzword in the Singapore private wealth sector. Private wealth management in Singapore has gone beyond the granting of investment mandates to private banks and fund management companies. Asian families have started setting up single family offices to manage their wealth in a professional manner to achieve wealth preservation and growth.
Growth of family offices in the Asia-Pacific region is accelerating and Singapore has been a key beneficiary of this trend. The Asia-Pacific region is currently home to 1,300 family offices, out of an estimated 7,000 to 10,000 globally. The number of family offices in Singapore has quadrupled from 2016 to 2018, according to data from the Monetary Authority of Singapore (MAS).
The growth is not only attributable to Asian families. As mentioned by Ms Thong Leng Yeng, of MAS last September, the MAS also sees an increasing number of US and European family offices setting up satellite offices in Singapore, as Singapore offers investors access to pan-Asian and global opportunities.
Family Offices In Singapore
A family office can mean different things to different people. Some view a family office as an administrative arm of the family while others view it as an entity to support the various needs of the families including fund management, philanthropy and other matters.
Most family offices we see in Singapore are focused on fund management. We see an increased interest in in-sourcing of the fund management function since families want to be more involved in the management of their financial assets and want to centralise the function. Many families tend to have banking and asset management relationships with multiple service providers. The centralisation of the fund management function in the family office allows the family to have a better overview of their financial investment positions and relationships. We also see more next generation family members seeking to build a track record by managing their family wealth first and then pave the way to manage third party money in the future.
Singapore As A Location
Traditionally, family offices were set-up in onshore jurisdictions where the investment team and family members reside, whilst the trust structures and investment vehicles were set-up in offshore jurisdictions. However, this approach of splitting the family office and investment vehicles between two locations is changing for many reasons including the increased emphasis on substance by authorities around the world. Families are preferring to have both of these in the same location. In this respect, Singapore is an attractive location where you can have both your family office as well as the trust and investment vehicles.
Singapore is a good family office location as it has the right ingredients including the availability of talent, high standard of living, and safety, all of which attracts family members to live and work in Singapore. The families also have existing private banking relationships with private banks and wealth managers in Singapore, which then makes Singapore a natural choice for locating their family office.
Singapore is a good location to locate investment vehicles for a variety of reasons including the availability of several legal forms (such as trusts, companies, limited partnerships and the latest addition of Variable Capital Companies). Further, Singapore is known as a jurisdiction that has a strong regulatory framework and rule of law, no foreign exchange controls and stable and pro-business Government policies.
This dual purpose of Singapore is one of the key reasons for Singapore’s success in the family office space.
At a simplistic level, in a Singapore family office structure you are likely to see at least two Singapore entities. One entity will be the single-family office and the other will be the family office fund (or investment vehicle). There could also be a family trust which holds the single-family office and the family fund. Trusts are commonly used to accommodate succession planning.
The investment team sits in the single- family office and the investments sit in the family fund, with an investment management agreement between the two entities allowing the single- family office to manage the assets of the family fund.
What Is Singapore Doing To Enhance The Singapore Family Office Ecosystem?
The trend of family offices in Singapore is expected to grow for many reasons including the accumulating wealth in Asia, the desire for families outside Asia to participate in the growth in Asia, or for some family members to even relocate to Asia, and the rising demand for a jurisdiction which can have the family office as well as the investment vehicles. Singapore is well poised for this growth and it is fair to give credit to the Singapore Government for continuously seeking improvements. We mention two recent initiatives of the Government in this regard.
One of the areas the Government has been working on with the industry is to strengthen the expertise and pipeline of family office professionals in Singapore. Together with the Institute of Banking and Finance (IBF) and the industry, the MAS has curated a series of courses to upskill talents with skills expected of family office professionals. This aspect is important to emphasise since Singapore is not a jurisdiction which limits itself to offering vehicles and structures, but it also goes the extra mile to develop the skill level locally so that businesses (in this case, family offices) can operate through substantive operations here.
Another area the Government has been working on is to evaluate the possibility of allowing family funds managed by single family offices to be set up in the form of a Variable Capital Company (VCC). VCC is a new corporate form in Singapore for investment funds, which can only be set up by licensed fund management companies currently. There are several benefits to using a VCC for investment purposes. Single family offices are often not required to be licensed and hence they cannot set up VCCs. Allowing single family offices which are not licensed to set up a VCC as a family investment fund will go a long way in supporting family offices in relation to the suite of vehicles available. Whilst any amendments to law may take time, should the enhancement be made, we expect another wave of family office set-ups in Singapore along with their investment structures.
Whilst there are many locations competing for this space, Singapore has found a niche based on the many areas that make Singapore attractive. Given the benefits and efficiencies of operating from Singapore, we are seeing families with investable assets of US$100m to several billions setting up Singapore family offices. We expect the buzz around family offices to continue in Singapore for the foreseeable future.
Anuj specialises in the Asset and Wealth Management sector and spends most of his time advising family offices, private equity funds, hedge funds, sovereign wealth funds and other asset owners. Anuj is actively involved in discussing asset and wealth management issues with the relevant authorities, industry associations and other stakeholders.
Trevina has over 11 years of tax experience in the financial services sector. She specialises in the Asset and Wealth Management Sector, advising clients on a variety of projects including set up of family offices and investment funds.