A growing number of Indian families are exploring the possibility of setting up family offices in Singapore as they seek to diversify investments in low-tax jurisdictions.
There has been a significant uptick in enquiries from wealthy Indians wanting to set up family offices abroad and Singapore is a preferred choice,” Mohit Ralhan, global CEO and managing partner of TIW Capital Group told AsianInvestor.
“This has also got impetus due to a change in overseas investment rules in August last year, with the Reserve Bank of India (RBI) permitting profitable non-financial entities to set up financial services units outside India and invest up to 400% of the investing firm’s net worth.
TIW Capital Group
"The next generation of wealthy Indian families are, more often than not, inclined to study outside India and eventually settle outside India. We have seen significant real enquiries coming and Singapore is at the top of the list,” he said.
TIW offers family office management services to clients among other investment-related services.
In the past few years, Singapore has made concerted efforts to attract family offices with a slew of measures.
In particular, it has attracted many families from mainland China in the past three years and the COVID-19 pandemic brought in severe restrictions in Hong Kong.
In recent months, Hong Kong has also stepped up its campaign to woo family offices.
Even India’s richest man, Mukesh Ambani, has reportedly set up a family office in Singapore.
It’s not hard to see why Singapore is one of the top choices for India’s wealthy.
“Singapore has positioned itself to be a comprehensive jurisdiction for global families," said Manish Tibrewal, co-founder of Farro Capital, which has also received a major chunk of enquiries from Indian families.
"Whether it is the access to global investment opportunities, robust legal system and infrastructure, access to talent pool, networking opportunities, or creating a support system for philanthropic objectives of the families. Geographical proximity and good network for flights from Singapore to all major cities in India also helps from a familiarity perspective."
The Singapore-based multi-family office, which has a global clientele, hit the $1 billion mark in assets under management by March 2023 – a few short months after its October 2022 launch.
Other experts noted that Singapore also has cultural and social advantages sought by Indian rich families.
“Education, for example, is an important consideration for an Indian or Indian-origin family. Singapore has one of the best education systems globally,” said Prashant Tandon, managing director and CEO for Dubai, Lighthouse Canton.
Tandon is part of the team that manages the wealth management business related to non-resident Indians.
“Culturally, Singapore and India have a lot in common. It would be easy for an Indian family to acclimatise,” he told AsianInvestor.
NEED FOR DIVERSIFICATION
There’s little doubt that interest will only grow over the next few years.
Many second-generation high net-worth families are looking to relocate and settle overseas for a variety or reasons, ranging from education and lifestyle to business expansion and new opportunities, said TIW’s Ralhan.
“India’s relatively higher tax regime also plays its part, especially when investing overseas assets.”
Given that HNI families have a global investment portfolio, it makes sense to make global investments from overseas locations, he noted.
“This trend is going to increase as overseas asset allocation of Indian HNI families increases from below 10% currently to a more reasonable range of 20% to 25%.”
A statement by senior Singapore minister Tharman Shanmugharatnam in March said there were about 200 single family offices tax incentive applicants awaiting approval – indicating high interest in Singapore as family office jurisdiction.
Single family offices do not need a license to operate in Singapore, which is similar to other major jurisdictions like Hong Kong and Switzerland.
A single family office seeks a license when it wants to avail tax incentives on income derived from investments managed in the city-state.
SUPPLY VERSUS DEMAND
Such high demand, in turn, will require a step-up in the supply of related service providers to family offices.
“Talent continues to be a point of concern across the global financial services,” said Lighhouse Canton’s Tandon.
“It certainly is a challenge in the geographies that we operate in – Singapore, UAE and India. Governments across the globe, including Singapore, have become stringent with respect to immigration policies after the outbreak, and rightly so.”
“If the current growth trajectory continues, it may necessitate infrastructure reform, encompassing both physical assets and regulatory frameworks,” he added.
Farro Capital’s Tibrewal sits in the camp that believes there is no dearth of professionals that can handle investments.
“But there are very few people who understand the family value and purpose, how to align the overall vision and mission of the family office to the family values, designing and implementing the family governance, philanthropy and similar non-financial aspects of a family office.”
This story has been updated to state Farro Capital has a global client base.