Private wealth, led by Chinese affluence, is burgeoning in Asia, and the region's financial hubs are pulling out all the stops to attract family offices. But each jurisdiction has its own appeal and is not necessarily in competition with one another, industry insiders said.
In recent years, Hong Kong and Singapore have rolled out incentives to attract family offices. Singapore, for instance, launched tax-exemption schemes for qualified family offices, and a flexible framework called variable capital companies that has been compared to a Cayman structure to ease the setting up of funds.
In March, Hong Kong announced policy incentives to attract family offices including a visa scheme, tax breaks, talent training, and measures to boost art storage and philanthropy.
Media reports have framed these incentives as a battle for mainland Chinese wealth — China has the second-largest number of ultra-high-net-worth individuals with more than $100 million at the end of 2021, according to the Credit Suisse Global Wealth Report 2022. It had 32,710 ultra-high-net-worth individuals, behind the U.S., which had 141,140.
Within Asia, India took second place with 4,980 individuals, slightly ahead of Japan, which had 4,870. China was also the fastest growing in the region, having added 5,200 (or a 19% increase) ultra-high-net-worth individuals compared to the year before, while India had an increase of 720.
Schroders PLC has recognized that China is the biggest contributor to the pace of wealth growth in Asia, and set its sights on the country as a key target market, said Jason Lai, Singapore-based CEO of wealth management for Asia at Schroders.
"The number of affluent families in China and their combined wealth have continued to grow despite the COVID-19 pandemic as well as the current state of economic and political uncertainties," he said.
He believes that the rollout of policy incentives in Hong Kong and Singapore will facilitate the setting up of more family offices in the region.
Singapore, in particular, is attractive to investors because of its "strong financial structure, highly qualified human capital pool, open economy, geographical location, consultative and consistent policymaking as well as its effective legal, regulatory and tax framework. In addition, the city-state's high living standards with a quality health-care system and established education infrastructure further entrench its attractiveness," he said.
Other sources said that Hong Kong's incentives have their appeal, but mainland Chinese families are reluctant to park their money in Hong Kong as Beijing has tightened its grip on the city in recent years.
"Singapore has done a better job in the family office space than Hong Kong, but I'm not sure if it's because of political reasons that put people off from coming to Hong Kong — more so than how attractive Singapore is," said Patrick Tsang, chairman of single family office Tsangs Group.
Tsangs Group did not disclose its AUM. The average AUM of single family offices in Asia-Pacific was $600 million in 2019, according to the UBS/Campden Wealth Global Family Office Report that year, the most recent update on that data point.
Some mainland Chinese family offices are also drawn to the safety and familiar culture of Singapore, but use it as a base to invest back into Hong Kong assets from their Singapore-registered private bank accounts.
"The Chinese want to make money, and the most liquid market in the region is obviously Hong Kong. It's quite ironic in a way that they've moved money out of China, but they still want to invest into China," he said.
Singapore has tried to stem the outflow of money by releasing new rules in April last year stipulating that single-family offices must invest 10% of funds managed, or S$10 million ($7.5 million), whichever is lower, locally.
Still, each jurisdiction has its perks, Mr. Tsang said. Tsangs Group is headquartered in Hong Kong, with offices in London, Dubai and Singapore. The Singapore office is currently registered as a management consultant company to explore private deals, with a view to convert into a registered family office if there are good investment opportunities.
"Dubai, Singapore, Hong Kong — we all share one thing in common in that we're all fishing villages, a trade port with no resources, that have become tourist and financial hubs," he said. "Dubai is the gateway into the MENA (Middle East and North Africa) region. Singapore is the gateway into Southeast Asia and then Hong Kong was the gateway into China in the Greater Bay Area. But I don't think there's competition. ... You have to go to the respective places to get all the different kinds of opportunities."
When helping clients decide which jurisdictions to set up in, Hemant Tucker, co-founder and CEO of multifamily office Farro Capital, said that it depends on the family's needs.
"Is Singapore more attractive or is Hong Kong better, or another jurisdiction? We are very client-centric. Whichever jurisdiction or structure makes sense for the family — we make the suggestions and then it's our job on an ongoing basis to track (the complexities of the jurisdiction)," he said.