The emirate of Dubai is attracting more Asian family offices looking to set up base and diversify investments, even as Singapore and Hong Kong battle it out to become the region's top family office destination.
Singapore has been a clear leader in the region in attracting family offices from across the region over the past few years; however, demand could slacken in 2024 amid greater regulatory scrutiny.
“The Monetary Authority of Singapore (MAS) has taken a proactive stance and has prescribed stricter norms for both SFOs and MFOs to improve the onboarding and monitoring of clients,” said Manish Tibrewal, co-founder of multi-family office Farro Capital, in an exclusive interview with AsianInvestor.
“This would have some impact on the pace at which the approvals may be granted."
A $2.1 billion money laundering case that erupted last year saw some of the accused linked to single family offices (SFOs).
In December 2023, MAS announced that SFOs in Singapore wanting to tap tax incentives will face enhanced checks by the regulator almost immediately.
According to MAS, the number of Singapore-registered family offices surged to 1,100 at the end of 2022, up from 400 in 2020 and just 50 in 2018.
“Local financial institutions are conducting more stringent checks and lengthening due diligence processes,” said Derrick Tan, chairman at wealth advisors WRISE Group.
“Clients have provided feedback that the waiting period for opening a private banking account with banks and financial institutions in Singapore is longer.”
At the same time, Dubai continues to attract wealthy Asian families, and this has been accelerated over the last few years by their open-door policy during COVID-19 and a golden visa program.
It continues to serve as an important alternate location for Asian family offices due to fewer personal restrictions, lower costs, and access to lifestyle options.
Recent regulations, such as the Dubai International Financial Centre (DIFC) Family Arrangements Regulations enacted last year, have been tailored to solidify Dubai’s appeal for family offices.
“Aside from certification and accreditation programs for family businesses and their advisors, the new regulations also ensure family businesses help to clearly define arrangements that families can make such as the preservation of their wealth, as well as succession and legacy planning,” WRISE’s Tan noted.
“The Family Wealth Center set up as a part of DIFC is also facilitating, educating and networking like-minded families,” according to Tibrewal.
Taxation policies are also keenly watched by family offices setting up their centres.
Ali Shaikley, a Middle East M&A lawyer at Sidley Austins, noted, “Dubai’s low tax policies, including 0% corporate tax available for single-family offices and no personal tax, along with its wide network of tax treaties providing access to attractive withholding tax rates, have also been a consistent reason why family offices have turned to Dubai.”
The profile of family offices expanding in Dubai has also been changing slowly. Traditionally, such families built their wealth within in the region, primarily from engaging in the oil and real estate sectors. Increasingly, families now setting up offices in the city built their wealth in other countries, diversifying their investment profiles.
Farro Capital has observed “significant interest in Dubai as a destination, from families from the Middle East, Europe, India, and Africa. These families encompass a diverse range, including traditional multi-generational ones to modern tech unicorn founders.”
Tan has observed that families moving to Dubai tend to be "more diversified and more opportunistic in the industries and sectors they invest in. They use a combination of public and private markets, equity, and debt across
Dubai-based SFOs are increasingly interested in private equity and venture capital, according to WRISE’s Tan. Additionally, two new trends are emerging in the investment portfolios of both SFOs and MFOs in Dubai.
“Firstly, environmental, social, and governance factors are increasingly shaping new investment decisions, and secondly, digital assets, fintech, and blockchain technologies are being closely monitored and, in many cases, actively incorporated into investment strategies,” Tan said.