A decade ago, Singapore had a fraction of its current millionaire population, yet with a significant surge during the past 10 years the count sits at nearly 250,000 today. By stark contrast, London’s millionaire population has experienced a downturn, shrinking by 10% over the same period with 227,000 millionaires. This striking difference underscores Singapore’s remarkable growth trajectory and its emergence as a global wealth hub, outpacing even established financial centres such as London in millionaire residents.
But Singapore is not alone. In tandem with this burgeoning wealth landscape, a significant number of the world’s high net worth individuals (HNWIs) now reside in Asia. The region has been a major driver of global family office growth, with the 2023 Global Family Office Compensation Benchmark Report suggesting that Asia hosts 9% of the 20,000 global family offices in existence.
Despite macroeconomic instability caused by factors such as inflation and geopolitical tensions, Asia has seen rapid growth due to economic development and a new generation of millionaires.
Knight Frank’s 2024 Wealth Report reveals over 165,400 ultra high net worth individuals (UHNWIs) are based in Asia in 2023 and is set to increase to 230,000 by 2028, positioning Asia to surpass North America in ultra-wealthy individuals. Thistranslates to a rising demand for wealth management solutions such as family offices. Originally designed to manage the wealth of HNWIs, the role of family offices has expanded to encompass strategic investments and influencing corporate governance.
Looking ahead, sectoral and macroeconomic trends are also set to further fuel the continued growth of family offices in 2024 and beyond, with a particular focus on Asia.
Why Asia?
In Asia, financial centres such as Singapore and Hong Kong are prime hubs for family offices, offering political and economic stability, robust regulatory frameworks, and a highly skilled workforce. These factors create a secure and supportive environment for managing wealth.
Both Singapore and Hong Kong hold different appeal in the competition to woo global family offices. Hong Kong’s emphasis on cost-effectiveness and convenient access to China’s Greater Bay Area (GBA) may appeal to some while others may find Singapore’s emphasis on cultivating a worldwide family office network appealing, particularly those in search of a wide range of services and highly skilled professionals with extensive industry knowledge.
Singapore continues to implement policies that attract enterprises in strategic sectors and industries such as advanced manufacturing, financial services, technology, and intellectual property while Hong Kong is beginning to diversify from its mainstay of financial services, tourism, trading and logistics, and professional and production service industries into innovative technology, maritime and aviation.
While family offices in Singapore show a growing preference for the variable capital company (VCC) structure, Hong Kong-based family offices prefer the family-owned investment holding vehicles (FIHVs) structure.
Despite strong regulations in Singapore and Hong Kong, there are variations and nuances across the region which could be challenging for family offices operating and investing in multiple Asian markets.
Asia’s private markets: the preferred asset class
From real estate to infrastructure, private equity, private debt, taxation, corporate structuring, and transfer, as well as the production of accounting and sustainability reports, family offices are now specialising in a broader range of alternative asset classes and sectors in order to offer broader investment solutions.
In Asia, asset classes such as private credit are fast gaining traction, offering attractive risk-adjusted returns amid retreating traditional banks. The UBS Global Family Office Report 2023 reveals a growing demand for private markets with family offices actively seeking private equity deals. Asia is characterised by a high demand for equities (37%), with a clear preference for direct private equity investments (31%). It’s particularly noteworthy that 77% of private equity investments are channelled into technology-oriented companies.
Demographic shifts, especially the rising influence of millennials and Generation Z, are also reshaping the family office landscape, leading to a greater emphasis on social impact investing, technology integration, and sustainability in wealth management strategies.
Asian family offices growing interest in alternative assets such as real estate and private equity to expand their investment options, could also create higher risks and complexities that may impact the performance and sustainability of investments without the right support.
Looking ahead: a positive outlook
Family offices are gearing up for the future with resilience and a commitment to positive change and steady growth. As a whole, Asia presents exciting investment prospects across various sectors, including technology, infrastructure, and real estate, providing family offices with opportunities to tap into this dynamic market for growth.
Key drivers include the decentralisation of financial management within families, leading to a focus on sustainable and responsible investing, as well as investments in local businesses and new technologies. Additionally, sustainability is a focal point, with a significant portion of family offices already investing in sustainable assets and aiming for fully sustainable portfolios by 2025.
Geographical diversification is also on the agenda, with family offices planning to broaden their allocations in the Asia region and seeking to diversify their exposure. As markets normalise in 2024, with inflation expected to decrease and central banks likely to maintain restrictive monetary policies, the environment is anticipated to become more favorable for investment.
By Neil Synnott, Chief Commercial Officer, Asia, IQ-EQ.
