The number of family offices operating in Singapore has soared in the past two years as wealthy Chinese sought to diversify their risk exposure against a backdrop of Beijing’s increasing influence in Hong Kong.
By the end of 2022, as many as 1,500 family offices had operations in the city-state, according to some industry experts, more than double the 700 as of end 2021 that was calculated by its central bank, the Monetary Authority of Singapore (MAS) — and way up from the 400 as of end 2020, and the mere 50 as recently as 2018.
Kia Meng Loh, co-head of the private wealth and family office practices at "Big Five" law firm Dentons Rodyk, believed the number of Singapore-based family offices that were of Chinese origin, including those with roots in Hong Kong and Macau, easily exceeded 45% to 50%.
Michael Marquardt, Asia chief executive at IQ-EQ, an investor services firm that sets up family offices, put the figure closer to 40%. Others volunteered anecdotal evidence that the number was even higher, underlining the difficulty of obtaining precise data on an investment market where privacy and discretion are hallmarks.
HEDGING HONG KONG
The consensus among sources who spoke with AsianInvestor was that there has been a major influx of Chinese family money into Singapore, as wealthy families reduced their exposure to existing, potential, and perceived headwinds associated with China as well as the jurisdictions over which it exercises authority.
“Hong Kong is too close for comfort with China,” Ryan Lin, a director at Singapore firm Bayfront Law, told AsianInvestor. “If I’m Chinese, I want to manage my money in a safe jurisdiction, and from this perspective, Singapore is probably a bit safer.”
Iu-Jin Ong, founder of Hong Kong-headquartered single-family office Ambitum Capital, told AsianInvestor he was unsurprised to see Chinese family offices setting up in Singapore.
“It appeals to many families to situate their wealth outside of their home territory,” he said. “This may therefore disadvantage Hong Kong in the context of mainland opportunities, and in the same light explain the growth of Singapore for Greater China assets.”
Hong Kong may have fallen out of favour with some investors due to Beijing’s increasingly interventionist stance towards the territory, which is supposed to operate under its own legal and political system, although Singapore’s rise as a family office hub has not come entirely at Hong Kong’s expense.
Loh said he had two categories of Chinese clients, one of which comprised investors that had started family offices in Hong Kong but were moving some of their wealth to Singapore as a diversification measure. “They’re not closing down in Hong Kong, because it’s still nearest to China and it’s still much easier than coming directly to Singapore,” he said.
“Those in the second category don't have a family office or any assets under management, and they're starting to manage their personal wealth outside of China for the first time. These investors are saying, ‘If I really want to put my money outside of China, let's put it really outside of China’,” he explained.
Lin observed a similar dynamic, saying: “I’ve seen people diversify where their family offices are, and they’re just trying to make sure that they don't put everything in the same basket. But they’re in the minority for me. We’ve set up more than 70 family offices for Chinese clients in Singapore, and most are ‘first-timers’ who come into Singapore having bypassed Hong Kong.”
IQ-EQ’s Marquardt said that for family office investors, Hong Kong suffered from a “perception issue”, but he downplayed the role of politics.
“I think everybody wants to see the political angle, but at a certain point, when you have a large family and a large amount of wealth, you want to diversify where you have that money,” he told AsianInvestor. “I think Chinese family offices are acting rationally and no differently from other people who are wealthy.”
Loh said China’s response to the Covid pandemic — a response that found an echo in the strict controls imposed in Hong Kong — had likely prompted wealthy individuals and families to think harder about where they put their assets, and a trend had taken root among those watching their peers open family offices in Singapore.
“I’d say this has been happening for the past few years, increasing during the pandemic, probably because rich Chinese — who are usually the first generation — had been focusing a lot on making money,” he said. “But when the country was locked down and with the zero-Covid situation in China, they had time to pause, think, and say, ‘What should I do with my money?’
AsianInvestor will be hosting its Family Office Briefing on March 28 in Hong Kong, which will bring together a select group of family offices. For more details, click here.