More funds for private markets as family offices expand in Singapore

May 17, 2022

SINGAPORE - The opening of more family offices in Singapore will ramp up investment in the private market, said analysts.

With a new generation of family office leaders proactively exploring alternative investments to grow and manage their wealth, analysts have observed a marked shift in family office investment strategies, as more funds are now being allocated to private equities, particularly start-ups.

Ms Lim Li Li, head of global investors, family offices and financial intermediaries at Bank of Singapore, said new assets from the global investors and family offices segment have grown 40 per cent from 2019 to 2021.

And there has been a clear shift in investments towards private equity, venture capital, real estate, direct investments and hedge funds.

"With low rates and low yields seemingly set for the long term, public markets are no longer able to provide the dependable performance that investors could once rely on, and even equity markets are increasingly dominated by concerns over volatility and froth," said Ms Lim.

"The reality is that a significant proportion of today's economic growth is found outside the public realm. As a result of this, alternative investments such as private markets are generating ever-greater interest as sources of diversification and returns."

Ms Lim added: "The forces of disruption accelerated by the pandemic have brought about rapid innovations that can provide phenomenal growth opportunities for promising early-stage disrupters, thus making venture investing rewarding."

As at March 31 this year, Bank of Singapore's assets under management (AUM) was US$119 billion (S$166 billion).

Hong Kong tycoon Li Ka Shing's family office is the latest to join a raft of high-profile investment outlets and family offices, including those of Google co-founder Sergey Brin and British billionaire James Dyson, to set up branches in Singapore.

A family office is an advisory firm set up to manage the assets of a rich family. It handles financial investments, shares, properties and other assets, as well as tax and legal affairs.

Analysts said Singapore's low taxes, high level of transparency and standards of governance have appealed to these foreigners. As at the end of 2020, there were about 400 family offices here, doubling from the year before.

In April, Singapore's central bank tightened regulations for family offices and mandated qualifying family offices to invest at least 10 per cent of their AUM or $10 million, whichever is lower, in local investments.

Mr Linus Lim, chief executive of Phillip Capital Management, who also manages his family's private funds, said he has increasingly been spending more time looking at the private sector.

"We have invested into founders at an early stage and we find it rewarding to see companies and founders grow over time," said Mr Lim, who had invested in fintech firm HG Exchange.

Mr Manish Tibrewal, CEO of Maitri Asset Management, who helped to set up and manages the Tolaram family office, said the firm has increased its investments in the private market over the years.

"We believe that companies' growth is increasingly captured at the private stage, which correspondingly creates higher returns for investors," said Mr Tibrewal.

"Two of the most critical factors we look for are the passion of their founders, and their corporate governance standards and practices."

Industry experts said they have also noticed an increasing interest in non-traditional investments, such as in cryptocurrency and environmental, social and governance (ESG), from family offices.

Mr Aegon Jae, co-founder of Ternary Fund Management, said: "There has been a marked shift towards technology, crypto, metaverse and blockchain in family office investment strategies.

"Younger generations are looking more closely at such sectors that interest them. However, with the current situation developing in the crypto market, we will likely see a loss of confidence here in the next 18 to 24 months."

Noting evident growth in ESG, impact investment and philanthropy, Mr Jae said: "The young generation who have started to have a say in the running of the family businesses are keenly studying these new opportunities. They see tremendous upside in businesses related to these sectors and have been persuading their parents to dip their toes in."

Ms Lim noted that the growing interest in ESG investment from the bank's family office clients "is driven by a heightened awareness in sustainable investing and a sense of responsibility towards the world we live in".

"ESG investing also enables families to align a more significant portion of their portfolio with ethical and philanthropic priorities, generating both returns and positive outcomes," she added.

"It can also be an effective tool in uniting generations where a defined set of values defines and drives objectives and the family's legacy, making the world a better place for future generations."

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