Singapore allure for family offices strong amid new rules
Singapore’s de facto central bank earlier this month announced a slew of measures targeting family offices, whose numbers have soared during the past couple of years.
In doing so, the Monetary Authority of Singapore (MAS) unveiled rule changes that included a number of carrots, but also a few amendments that in some quarters have been characterised as sticks.
Yet the city-state’s appeal as a destination for family offices appears undimmed, according to sources in the sector who spoke with AsianInvestor, despite some criticisms of new measures such as requirements to hire non-family member investment professionals.
Michael Marquardt, Singapore-based Asia chief executive at IQ-EQ, an investor services firm that sets up family offices, told AsianInvestor that nothing in the MAS’s new measures had come as a surprise, and that they included nothing that would dampen the appeal of Singapore as a jurisdiction in which to establish and run family offices.
“It’s all about iterating and continuing to improve, based on the learnings and changes that are happening in the environment,” he said. “I think that’s actually something that families appreciate, because if there are changes, they’re understood, and they’re not so dramatic that you have to undo what you’ve done.”
HIRING LOCALLY
The new requirement to hire a non-family member — a move aimed at generating finance sector employment opportunities — was not seen as a burden, and Iu-Jin Ong, the Singaporean founder of Hong Kong-headquartered single-family office Ambitum Capital, said it was likely to deliver for Singapore.
“In terms of supporting Singapore’s wealth management industry, which is sizeable, the development of the family office part of it in this way is beneficial,” he said.
Harmen Overdijk, a Hong Kong-based chief investment officer at multi-family office Leo Wealth, which also operates in Singapore, said the hiring requirement would likely benefit multi-family offices in the city-state.
“In effect, given the way they’ve structured it, you need the help of a licensed asset manager – in other words, a multi-family office, so the increased requirement is good for businesses like ours,” he said.
A common gripe among finance sector executives in Singapore concerns a perceived lack of talent in the market, which could potentially complicate family offices’ implementation of the MAS’s new hiring mandate. Yet none of AsianInvestor’s sources regarded the issue of talent as particularly pressing or unique to Singapore.
“It's always an issue in terms of specific skill sets, but that goes for any country in the world,” Marquardt said. “If you're looking for someone with financial services skills at a VP level, you should be able to find someone. I think it’s just whether people are looking in the right place. Are they using the resources to find the right people?”
NEW OBLIGATIONS
The requirement to make local hires is accompanied by other new measures, such as a local spending requirement, a requirement to notify the MAS annually and when commencing operations, and a requirement to maintain a business relationship with an MAS-regulated financial institution.
There hasn’t been criticism, but rather speculation that they may be part of a strategy to slow the rate of family office openings in Singapore, which is estimated to have as many as 1,500 family offices at the end of last year, more than double the 700 calculated by the MAS at the end of 2021.
Overdijk said that contrary to a desire to stem the tide, the MAS was applying more rigour to the process of vetting applications to set up family offices.
“They want to make sure they’re genuine,” he said. “That’s something we also noticed in one process where we helped a family to obtain family office status. A lot of the questions are really focused on whether the family office is a genuine family office [rather than] a front for an operating business to get tax exemptions.”
Tax exemptions form the “carrot” component of the MAS’s new family office rules, providing relief on investments in non-listed Singapore businesses, including private credit, and on investments in Singapore-listed equities, certain exchange-traded funds, and unlisted funds that invest mainly in locally listed equities. In addition, there is a strong emphasis on green technologies by means such as blended finance, investments which are recognised at a ratio of S$2 for S$1.
Marquardt said the tax incentives were in line with long-standing policies in Singapore that had made the country by far the wealthiest in the region.
“What [the authorities] are doing is very consistent, what they’ve always done,” he said. “They've always said that green technology, climate change, and [environmental, social and governance issues] are very important to Singapore. They have for a long time said that private credit is an area they want to focus on, that the liquidity of the stock market has always been important to Singapore. So, if you look at where these tax incentives are going, it's to what's been important to Singapore over the long haul.”
PUSH AND PULL
In addition to the pull factor such incentives represent for family offices, the push factor of rising geopolitical tensions has been a motivation for some family offices to set up shop in Singapore rather than Hong Kong, Asia’s other family office hub.
An executive at a multi-family office who spoke on condition of anonymity said the city state had become increasingly attractive to mainland Chinse family offices, a view borne out by anecdotal evidence shared with AsianInvestor earlier this year.
“There will be some Chinese billionaires or people of high net worth that’ll be motivated to set up in Singapore and not in Hong Kong,” the source said. “We know the reasons why — because ultimately, Hong Kong is China, and some will naturally just choose to do it in Singapore and will take certain decisions based on that overriding point.”
Marquardt said Singapore had been insulating itself from potential geopolitical turmoil for decades, and that in the current climate, that was paying off in its heightened appeal to family offices.
“Singapore has built itself to be an island of stability in Asia and globally,” he said. “In a sea with a lot of troubled waters, it’s a port of stability. As global tensions have continued to mount, it’s been a beneficiary of that. They built the port before the storm started.”