Family offices may tap certain tax incentive schemes when they set up in Singapore and interest is certainly growing.
Q: There has been a lot of talk lately about family offices. What do those based here invest in?
A: Family offices are part of the asset management industry, which is in itself a key component of Singapore’s financial sector.
There is no standard definition of a family office as each family structures it according to its individual priorities.
Generally, it is a privately held entity set up by families to manage their financial and non-financial needs. These include investment management, wealth planning, philanthropy, family governance, legacy, education and oversight of family-owned businesses and assets.
Single-family offices handle one family’s assets. The Monetary Authority of Singapore (MAS) estimates there were around 700 single-family offices as at the end of 2021, nearly double the 400 from 2020. There are also multi-family offices that handle the assets of several families.
There are certain tax incentive schemes to encourage funds and investments to come to Singapore. Family offices may tap these schemes as they set up in Singapore and interest is certainly growing.
DBS Private Bank works with more than a third of the existing 700-odd single-family offices and saw an uptick in inquiries in the first quarter this year.
It may be a broad generalisation but the older generation is more inclined to invest in established asset classes such as equities and fixed income, while younger folk are less keen. DBS Private Bank group head Joseph Poon says: “The younger generation shows a greater openness towards less ‘traditional’ investments such as private assets and cryptocurrencies.”
The trend towards private assets has prompted DBS to offer more opportunities for clients in this area, including semi-liquid private funds and pre-IPO transactions, as well as longer-term investment options in private equity (PE), debt and even real estate funds.
Mr Poon says that adding private assets can actually make the overall portfolio less volatile, which is why the bank expects this asset class to become an important allocation in family-office portfolios.
Ms Lim Li Li, who heads Bank of Singapore’s (BoS) global investors, family offices and financial intermediaries unit, says that “most family offices invest globally in public markets across different asset classes, and strategically in businesses that complement their core business.”
In recent months, BoS has also seen an increased allocation in fixed income and private credit investments and hard assets such as real estate to hedge against inflation, adds Ms Lim.
Covid-19 and the geopolitical uncertainty plus the tech rout have seen investors turn more cautious to make sure their capital is safe.
Mr Poon says: “Most investors are comparatively risk-averse across the entire age spectrum given the heightened uncertainties and prefer to see the return ‘of’ capital rather than return ‘on’ capital.”
Mr Derrick Tan, chief executive of wealth management firm Wrise, says family offices are like private investment funds in that they have much greater flexibility to pursue businesses that interest them.
They may often be silent shareholders and not get involved in the decision-making process although they meet up with the board regularly to track the progress of the performance.
They may also make direct investments in companies that they are keen on, usually in innovative start-ups and up-and-coming tech firms, and choose to be personally involved in their development and growth, whether as an adviser or a mentor.
Independent asset manager Lucerne Asset Management has also seen an increase in demand for PE and venture capital type of investments.
CEO Tan Jian Yuan says: “An increasing trend in the next generation is that they either take a hands-off approach to how their business is run (and hire professional managers) or they sell off the operating business and then invest that money in traditional assets, but also with an increasing allocation to companies and new businesses or ventures.”
Tech has been a favourite, including food tech.
Kamet Capital Partners is an established multi-family office handling more than half a dozen wealthy clients. Among the investments it has made on behalf of its family offices is Doctor Anywhere (DA), a health-tech company that offers telemedicine and other healthcare services in six countries, including Vietnam, Thailand and Malaysia.
DA handles more than 2.5 million transactions a year. Around 3,000 general practitioners and specialists have signed up with it, including about 150 GPs and 50 specialists in Singapore. It has attracted about US$140 million (S$187 million) in funding, making it one of the most high-profile health-tech outfits in the region.
Kamet’s founder, Mr Kerry Goh, attributes DA’s success to the active mentoring of its founder, Mr Lim Wai Mun, by the family-office owners who shared their experience and discussed ideas and strategies.
The experience of these successful entrepreneurs also resulted in the strategy of setting up bricks-and-mortar outlets. As Mr Goh explains: “Back then, who has heard of telemedicine? So counter-intuitively, we needed to have these physical spaces to make sure that people knew what we were talking about.”
Other investments involving Kamet include J&T Express, a name familiar to those who shop on e-commerce platforms such as Lazada and Shopee. It offers a global one-stop logistics solution combined with a physical presence.
Another investment includes fintech firm Advance.AI. For the man on the street, one of its investments would be Atome, a “buy now, pay later” platform that splits consumers’ bills into three equal interest-free payments with no additional fees.
All of these businesses managed to raise funds in the past 18 months despite the challenging environment for tech, adds Mr Goh.
The multi-family office Winfield Global Capital is not averse to buying an established business. CEO Roger Zhu says: “One of my principals (the family-office owners) is looking to invest in companies which have a strong cash flow.
“It can be a boring business, but if the cash flow is good, why not? But sometimes the owners ask for a ridiculous price so we have to be on the lookout for good opportunities.”
Winfield has also made several tech investments. One of its principals founded Singapore-based Appguru Technology, a mobile developer and game publisher with an office in Singapore and China. It employs around 20 people here.
Another investment made a few years back was in VV Technology, which uses artificial intelligence (AI) and big data to create a work management suite. It helps clients let their staff work from anywhere and connect with businesses everywhere. VV Technology has more than 100 employees, based in Singapore and Xiamen in China.
ESG and sustainability considerations
Wealth management firm Farro Capital says the next generation of the rich are more interested in exploring newer technologies and asset classes, such as AI and the metaverse. This generation is “significantly more concerned with sustainable and responsible investing, indicating a shift towards socially conscious practices”, it adds.
That can be seen with Singapore-based Shiok Meats, which numbers family-office investors among its shareholders. It is working on a patent-pending technology that can produce meat and seafood using stem cells without having to slaughter animals.
CEO Sandhya Sriram says: “The ESG (environmental, social, and governance) and SDG (sustainable development goals) principles of our company are a major attraction for family offices who want to invest into companies that find sustainable solutions for today and the future.”
Another example is the Rumah Group family office, which looks at sustainable investments, communities and the environment. It says it invests for the future, with interests in sustainable building materials, alternative proteins and carbon projects, among others.
The family office, which was set up by Mr Stanley Tan, the CEO of real estate firm GYP Properties, and his daughter Kathlyn Tan, holds stakes in businesses such as Karana, which uses jackfruit in place of meat.
There is also Better Bite Ventures, which includes supporting start-ups in China and Australia in their efforts to develop cultivated meat. BillionBricks, another of the Rumah Group’s investments, looks at technologies for the housing industry that speed up construction and reduce carbon emissions.
While property purchases here hog the headlines, family offices here cannot include real estate in the amount of funds needed to qualify for tax incentives.
However, Singapore is viewed as a strong market and one where the rules are transparent and easy to understand.
A CEO of a multi-family office says some of his principals had leased homes but surging rents have prompted some to consider ownership. “Some of my principals are more interested in other sectors but sure, they will consider buying but it has to be that trophy asset.”
Winfield’s Mr Zhu agrees that family offices do invest in real estate: “My principal has invested in penthouses, shophouses and office properties. Property is a good investment and we are on the lookout for good opportunities.”
JL Family Office has interests that naturally lean towards real estate. It was set up by property bigwig John Lim who co-founded ARA with Hong Kong property conglomerate Cheung Kong Holdings, which is controlled by billionaire Li Ka Shing.
The family office invested in a shophouse in Club Street that also serves as its headquarters.
In 2021, the property arm of the family office co-invested with Savills Investment Management in British retail parks.
These are low-rise shopping centres typically situated in a city’s outskirts, serving the immediate neighbourhood and offering free parking. They offer large, open floor plates, suitable for big household chain stores, food and beverage operators and supermarkets.
JL Family Office Group CEO Andy Lim told The Business Times that retail parks can act as an inflation hedge: “When things get more expensive, spending habits will shift towards discount or bargain hunting.”
While some of the investment funds go into Singapore-based firms or the Singapore stock market, family offices point out that Singapore is too small to feature as a specific country that they need to invest in. In 2021, more than 90 per cent of Singapore’s assets under management were invested outside Singapore.
Wealth Management Institute CEO Foo Mee Har has highlighted some of the investment challenges family offices face.
Ms Foo, who is also the MP for West Coast GRC, told Parliament on Tuesday: “Family offices need to build a robust understanding of the investment landscape so that they can home in on areas of opportunity.”
She added: “(They) need to find like-minded partners for co-investments. Many family offices tell us they prefer to co-invest with other families, but only with those that they know and trust. A newly-arrived family office will need to build up these trusted networks before it can co-invest effectively.”
Ms Foo called for a systematic onboarding process to integrate newly-arrived wealthy individuals into Singapore’s enterprise and investment ecosystem, to make them aware of the promising research and tech innovations here.
Still, Mr Zhu points out that for investors, Singapore’s strength is its openness and networks where it is possible to meet many people from around the world, including some of the best fund managers from the United States, Europe, Middle East and China. They can share their experience, educate local investors and help with due diligence.
Written for The Straits Times by By Lee Su Shyan