Longevity even in disruptive markets: How Singapore’s family offices are built to last

The family office sector is growing quickly in Singapore. While family offices here typically start with an investment management team, more sophisticated structures are rapidly emerging.

“With assets under management (AUM) increasing and families expanding, we’ll see family office functions broaden,” explains Vikna Rajah, Equity Partner and Head of Tax, Trust and Private Wealth at Rajah & Tann Singapore LLP. “We foresee family offices expanding their mandate in terms of philanthropy, family governance, succession and education, risk management, logistic, legal and financial functions”.

As family offices evolve to better serve the personalised needs of each family and their businesses, Singapore is fertile ground for their growth as a global-Asia gateway to foreign markets.

Accessing wealth of opportunities in Asia through Singapore

According to a study by UBS, family offices in Asia outperformed those globally in 2019-2020 in terms of investment management.  

This trend is only expected to continue with Singapore as a key contributor. “The IMF [International Monetary Fund] describes Singapore’s banking and finance industry as ‘amongst the best globally’,” Rajah & Tann and Deloitte Private’s report, Family Offices in Singapore, reads.

The country’s financial prowess allows family offices to tap into the region’s unique growth opportunities.

For instance, more than half of family offices see private equity (PE) and venture capital (VC) investments as their preferred source of opportunity. In 2020, Singapore’s AUM for PE and VC investments increased by 54% to S$391 billion from the previous year. This reflects a broader trend of “exponential growth” for SEA startups and VCs, according to Mr. Rajah.

The Family Offices in Singapore report, with support from Singapore’s Economic Development Board (EDB), illustrates how families have benefited from the country’s infrastructure and position in the region as a stable financial hub.

“Singapore has a large number of sophisticated fund managers and a close community of investors,” Mr. Rajah explains. Families can explore co-investments with various stakeholders, including global families who have established their family offices in Singapore.

Mr. C*, whose family has established a family office here, saw such opportunities and incorporated a healthcare company in Singapore. In 2019, Singapore kept its lead as the biggest Southeast Asian driver of health-tech investment funding, accounting for 54% of health-tech deal flow in the region. Mr. C’s company has been rapidly expanding. His other investments, which span multiple industries, are now consolidated and primed for growth under his family office.

Long-term stability with robust infrastructure

Singapore has also proved to be that “safe harbour” families are looking for, Mr. Rajah shares. Weathering through the Covid-19 pandemic with sure-footed decision-making, Singapore drew S$17.2 billion in investments in 2020, a 12-year high despite the throes of the crisis.  

This is owed to the country’s trustworthiness, strong rule of law and reliable workforce. Singapore was ranked the world’s 3rd least corrupt country out of 180 countries in 2020, and its low crime rates are a testament to this, which is fundamental for expanding family offices that are concerned about the security of their assets and family.

This secure infrastructure is supported by a “competitive and highly skilled workforce [whose] number of highly educated professionals is growing all the time”, according to the Family Offices in Singapore report.

These professionals — private bankers, trustees, asset managers, family office executives and so on— are housed within the same jurisdiction. Consistent and clear regulation supports the development of quality and reliable family office operations in Singapore.

Singapore is also the legal forum shopper’s destination. Mr. Rajah elucidated a sentiment shared by many of his clients: “There was an understanding and acceptance that Singapore courts would be clear, unbiased, thorough and would look in detail at the evidence before reaching any conclusion.”

Beyond peace of mind and security, this sort of consistency and trust allows family offices farsightedness when planning their next steps and also follows through in the city’s tax regime.

As a respectable tax jurisdiction, “we are in this great position where we are a legitimate onshore jurisdiction, but with a favourable, fair and transparent tax regime,” Mr. Rajah notes.

Bespoke offices expertly designed for the generations to come

Family offices allow “oversight and balancing of risk across a family’s entire portfolio”, as opposed to disparate “pockets” of wealth being managed by different private banks, Mr. Rajah explains.  

“Professionals at that level, whose interests are aligned with the family’s and not to generating sales or revenue, really help the families manage their risk,” he continues.

To ensure that wealth lasts many generations, professionals like Mr. Rajah and his team at Rajah & Tann assist family offices with family governance and succession planning. These mechanisms not only help to ensure that each line of the family has a voice in the running of the family office, but also allows for the fair distribution and management of assets, ensuring wealth continuity and family unity.

Family offices can also build relationships with Asia’s top universities in the country to oversee the next generations’ needs for education and even train them for family office or business management.

From the report, Mr. D’s* children, after graduating from Singapore’s universities, were able to gain experience managing the family office under the supervision of a trusted team of investment professionals hand-picked by Mr. D himself. His children would also attend education programmes in Singapore hosted by and for family office executives and experts.

This development of next-generation capabilities can be incorporated into family office structures and is supported by the wider family office ecosystem in Singapore. In this way, families can ensure the smooth handover and management of the family office and business for generations to come, at no expense of wealth or family values.

A promising future for family offices in Singapore

“We have the right framework, the right incentives coupled with substance to really push what family offices can achieve,” Mr. Rajah concludes. As a trusted and stable jurisdiction with strong legal and financial infrastructure, Singapore is well poised in developing global plans for clients with diverse backgrounds and needs.  

Mr. Rajah is confident that more families will flock to Singapore to set up family offices here: “That is a key trend that I’ve seen, and I think that will only continue.”

*Note: Mr. C and Mr. D – cited in the article above –have not been identified for privacy reasons.