Bold expansion plans for HK family office

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Raffles Family Office expects to grow AUM to $10bn and double headcount to 100 in the next two years.

Ray Tam, Raffles Family Office

The Hong Kong-based multi-family office, which was established two years ago, is aiming to open its Taiwan operations this year, according to Ray Tam, Hong Kong-based managing partner and co-founder.

“Taiwan is a place where we think that offshore assets have been going up, and we see a lot of opportunities for that especially with the [growing wealth of the second generation],” Tam said during a media briefing in Hong Kong this week.

Taiwan’s offshore fund assets have grown substantially. They were NT$3.18trn ($103bn) last year, which is larger than the domestic fund market (NT$2.57trn), according to data from Taiwan’s Securities Investment Trust and Consulting Association.

Raffles also has its sights on Southeast Asia, where it opened a Singapore office in October last year. The office is planned as a regional hub to service clients in Southeast Asia.

The Singapore office now has five people, including two managing partners, two relationship managers and one assistant relationship manager, according to Tam.

Tam added that Chinese families with capital in Hong Kong have been putting more money in Singapore due to the wider variety of offshore products. “I think more [Chinese investor] assets will be allocated around the world, and somehow money from Hong Kong will outflow to Singapore. That is why Hong Kong and Singapore will always be two engines that work together well,” he said.

The firm is also planning to open a representative office in Zurich with around four staff to service clients from its Hong Kong and Singapore offices, he added.

The $10bn goal

The firm’s regional plans come with a huge AUM target: Increase assets under management to $10bn from $1.5bn today.

About 95% of clients are mainland Chinese, but Tam noted that the percentage of Chinese money will decrease as the firm grows Southeast Asia assets.

Tam believes that the $10bn target is obtainable given the expected growth of the external asset management (EAM) industry, which includes non-bank wealth managers, such as family offices. EAMs in Asia manage only 6% of the region’s wealth, but that figure is expected to double by 2021, according to Tam.

Asia also lags European EAMs, which manage around 30% of client assets, he said.

This is especially true in China, where a majority of ultra high net worth individuals have not used family office services, according to a joint survey by Bain & Company and China Merchants Bank in 2017. However, around 80% of them have become more aware of family offices, with nearly half interested in wealth preservation and inheritance services.

“Families in Asia are now starting to care about succession planning. The divorce rate has also been increasing, so they are starting to ask how they are able to protect their assets,” Tam said.

Global private banks are also seeing opportunities in EAMs in Asia. Geneva-based Union Bancaire Privee, for example, hopes that it will derive 5% of its AUM in Asia by providing services to the EAM segment.

Family offices are also believed to be a major driver for Hong Kong’s private wealth industry, according to a joint survey conducted last year by KPMG and the Private Wealth Management Association in Hong Kong.

Around 41% say that family offices are an increasingly important source of business. In addition, a substantial portion of private wealth AUM is from family offices in various forms, such as single family offices or family offices embedded within family businesses, according to the survey.

Double headcount

To support its expansion plans, Raffles plans to double its headcount to 100 by 2020, which will include relationship managers and back office support. Without giving a breakdown, Tam said that the majority of them will be based in Hong Kong.

“We are thinking of having more compliance people this year. As the AUM increases, you will have more issues with compliance,” he noted.

The firm recently hired in Hong Kong for investment management roles, according to Tam. In December, it hired Lawrence Chan as a senior portfolio manager to manage global fixed income investments, while Desmond Cheung joined this month as a senior portfolio manager for equities.

Chan was previously the chief investment officer at Taiping Assets Management in Hong Kong, while Cheung was previously a London-based equity portfolio manager at Blackrock.

The firm has also set up partnerships to provide other wealth management services to clients, which include succession planning, custody and brokerage services, according to Tam.

They include 14 custodian banks, which include private banks in Hong Kong, Singapore, Switzerland and Liechtenstein, security houses and onshore and offshore insurance brokerage firms.

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