Competition increases for family offices across Asia

Over the past five years, the family office industry in Asia is seeing rising competition. As one of Asia’s top financial centers, Hong Kong has long been known as a family office hub in the region. But it began to lose luster in 2020 when China introduced the national security law for Hong Kong, criminalizing any act of secession, subversion, terrorism and collusion with foreign or external forces.

In 2021, as part of its efforts to promote its “common prosperity” concept, Beijing implemented large scale regulations and cracked down on perceived excesses of private industries, most prominently in the technology and property sectors.

It also passed new anti-monopoly rules, including one that stopped companies from using algorithms to make users spend more or to disrupt social orders. Many Chinese technology companies, including Alibaba Group, Tencent Holdings and Baidu Inc, were fined for breaking the new laws.

Meanwhile, the number of family offices in Singapore has grown from 400 in 2000 to 1,650 in August 2024. Tax incentives and the introduction of the variable capital company (VCC) structure in the city state in 2019 were among the factors that drove the increase.

Ultra-rich individuals that have set up family offices in Singapore over the past three years include Ray Dalio, founder of hedge fund management firm Bridgewater Associates, Google co-founder Sergey Brin, and Shu Ping, the Chinese billionaire behind Haidilao International Holdings, the world’s biggest chain of hotpot restaurants.

In 2023, Hong Kong upped its ante, and introduced new measures to attract single family offices. In May, the Hong Kong Legislative Council passed a law
for a concessionary tax regime for single family offices, exempting investment profits from the profit tax when specific conditions are met.

A month later, InvestHK, a government department responsible for foreign direct investments, launched a Network of Family Office Service Providers to create a supportive ecosystem for family offices globally looking to establish or expand their presence in Hong Kong.

Emergence of new players

This year, two other Southeast Asian countries were seen to be trying to replicate Hong Kong and Singapore’s wealth management success, by introducing measures to woo single family offices. In July, Luhut Pandjaitan, Indonesia’s chief investment minister, said the country is in the midst of setting up guidelines and regulation frameworks for family offices in Indonesia, with the details expected to be announced this October.

Meanwhile, just last month in September, Malaysia announced it will be offering a zero tax rate for single family offices, as part of the government’s plan to become a more “dynamic player on the global financial stage”.

Amir Hamzah Azizan, second finance minister of Malaysia, announced the Single Family Office Scheme, coordinated by the Securities Commission Malaysia, seeks to attract regional and Malaysian families who want to manage their family wealth from Malaysia.

Paul Chua, head of wealth planning and family office advisory at Bank of Singapore, the private banking arm of OCBC, Southeast Asia’s second largest bank, says there has been a noticeable surge of interest in family offices globally in recent years.

“Due to the unprecedented growth in overall wealth creation and net worth around the world, there is an increasing number of high and ultra-high net worth individuals qualifying for and establishing family offices, a very specialized form of wealth management. This momentum is particularly strong in Asia and the Middle East, where wealth has grown particularly fast,” Chua tells Asia Asset Management.

He adds that the surge in family offices in Asia is also driven by a notable wealth transfer to the next generation expected in the coming years, prompting families to explore innovative and increasingly professional approaches to asset and wealth management. “Naturally, countries in these regions are keen to attract more family offices so as to reap the potential wealth, economic and social benefits,” he says.

Benefits for financial markets

Bing Li, Head of Asia Pacific at Bloomberg, says there are multiple factors why countries are actively courting wealthy families to set up family offices in their jurisdictions. He also expects these countries’ competitiveness to intensify.

“Attracting family offices can help stimulate investment in various sectors in local markets and transform economies from traditional to more diversified economies. As countries recognize the potential benefits of fostering family offices, their strategies to attract them will continue to grow,” Li says.

“With the introduction of more favorable policies and robust regulatory frameworks, an increasing number of family offices and ultra-high net worth individuals will be attracted and will only further this trend,” he adds.

What attracts family offices?

Chua and Li also share their thoughts on what family offices might look for before deciding to set up a presence in a particular jurisdiction.

“An important factor to consider is the availability of talent across the wealth management ecosystem – from private banks and legal advisors to asset managers and accountants. As family office setups become more sophisticated and professional, the availability of specialized expertise in areas like estate planning, tax optimization, family governance and succession planning are particularly important,” Chua says.

Chua adds that political, economic and financial stability are also important to family offices, as this reduces the risk of sudden policy changes or socioeconomic disruptions that could impact investments and wealth preservation.

“A favorable business-friendly environment is also an attractive consideration, encompassing factors such as ease of doing business, low bureaucracy, efficient and law-based legal systems, protection of property rights, attractive tax regimes and incentives, and a transparent regulatory framework. This encourages investments and facilitates wealth management activities,” he attests.

“Another consideration is a robust and well-developed financial system infrastructure that enables family offices to effectively manage their wealth and assets and gives them better access to a wide range of financial services and global opportunities across private banking, wealth management, investment advisory, and capital markets,” he adds.

And while Li agrees with the factors highlighted by Chua, he also believes that there is no-one-size-fits-all method to attract family offices. “There’s an obvious temptation to treat family offices as homogeneous – but the truth is that each family office will have its own preferences and considerations,” he says.

“However, one thing they do all have in common is that they will consider a variety of factors when selecting locations for their establishment – as diverse as purely financial considerations but also the history and values of the family at the heart of the office,” Li adds. “In general, key factors for consideration include the regulatory environment and conditions, economic growth prospects, capital mobility, potential investment opportunities, access to strong supporting professional services, as well as the financial tools and data on hand in a given location.”

Future market leaders

Industry experts believe that Hong Kong and Singapore will remain two of the top family office markets in Asia over the next five years, and competition is likely to become more intense.

“We continue to see family office setups in both family office hubs to better capitalize on the opportunities they see in these markets. Both Singapore and Hong Kong offer supportive policies for family offices and also provide access to a range of global investment opportunities,” Chua says.

He adds that the jurisdictional consideration for family office setup is also determined to a large degree, by the proximity to principals and key decision makers of the family office, as well as the operating business.

He also notes that the Bank of Singapore “is well placed to tap on the family office opportunities in these two markets, given that we have hubs in both cities and there has been good momentum in our engagements with family offices.” Li adds that the strength of both Hong Kong and Singapore in this space shouldn’t surprise anyone as they are, after all, global financial centers. He notes that both markets are committed to establishing conducive environments for family offices, providing transparent and supportive regulations, tax incentives and sophisticated financial markets.

“It can be fraught to talk about Hong Kong and Singapore in terms of competition as it oversimplifies the relationship. Competition between financial centers is only one part of a wider relationship – in this case, both markets offer distinct and attractive features for family offices, and both markets will learn from each other as they strive to build vibrant family office ecosystems,” he says.

This article was written by Goh Thean Eu and is reproduced from Asia Asset Management.