- POSTED: 09 Jun 2014 20:56
- UPDATED: 09 Jun 2014 23:19
More family offices are being set up in Asia as wealth continues to grow in this region. Experts Channel NewsAsia spoke to say there are currently about 150 to 200 family offices in Asia.
SINGAPORE: Family offices are often compared to sovereign wealth funds or hedge funds. They are investment structures created by the ultra rich to manage the family's wealth - which can run up to billions of dollars.
Swiss bank UBS estimates there are about 400 plus billionaires in the region, of which the bank has a relationship with more than 50% of them.
Mr Munish Dhall, Executive Director of the Global Family Office for South Asia at UBS estimates that the wealth of ultra-high-net-worth individuals is growing at about double the rate of economic growth. "If economic growth in Asia is 4 to 5 per cent, the wealth of ultra-high-net-worth individuals is in low double digits and the wealth of the very top clients is growing at a much faster rate."
These top-tier clients are typically more sophisticated, and tend to take a longer-term view to investing.
Said Mr Rob Ioannou, co-head of HSBC Global Private Bank in South East Asia: "One of the trends we're seeing is an increasing exposure to international investments for ultra-high-net-worth families in Singapore, and not just focusing on the domestic market. Developed markets are already quite established for ultra-high-net-worth individuals like the UK, US, Australia. The ultra-high-net-worth investors are starting to explore the frontier and esoteric markets. So Cambodia, Sri Lanka and some of the lesser known emerging markets where there is opportunity to expand own businesses or grow and take stake in other businesses."
As wealth continues to grow in Asia, experts say they've seen an influx of ultra-high-net-worth individuals from the region coming to Singapore to set up family offices. The ultra-rich then use the family office in Singapore to make investments into other parts of the world. These family offices are typically geared to take on riskier investments as well.
UBS' Mr Dhall says family offices tell them they are concerned about permanent loss of capital, not volatility. "If there is a situation in the market, for example, the recent crises in Russia and Ukraine, many of our clients wanted to go into Russian securities when they felt the prices were depressed. This is not something that a normal ultra-high-net-worth client will do. These people can do that because they have the confidence that they can evaluate these things themselves and they can ride out the short term fluctuations and wait till the prices come back to fair value."
But family offices also require other services from private banks that go beyond financial advice.
Mr Lee Woon Shiu, Managing Director and Head of Wealth Planning for Trust and Insurance at the Bank of Singapore explained: "In the non-investment arena, they come to us looking for structures to shield them legally from taxes, regulatory scrutiny, all within the laws where they reside. Apart from the investment which is the core activity, very often, the underlying nuances which are really important are - how you resolve family disputes between members, how you ensure proper succession of the business which form the core of family wealth from generation to generation. That's where structuring and having the right family governance rules are very useful."
Some banks in Singapore also help family offices manage succession planning for women in the family, as well as other philanthropic causes.