Singapore has emerged as a leading destination for family offices, particularly those from South Korea and other Asian nations. As of 2023, roughly 60% of family offices in Asia are located in Singapore. This surge is creating new demands for alternative financing solutions, and EquitiesFirst, a global firm specializing in equities-based financing, is positioned to play a role in supporting this new ecosystem.
A Magnet for Family Offices
Since 2017, Singapore has witnessed a sevenfold increase in the number of family offices, with over 700 established by the end of 2023. This growth is part of a broader trend across Asia, where wealth accumulation has accelerated at breakneck speed in recent years.
The scale of this wealth accumulation is evident in several key indicators. China’s gross domestic product, measured by purchasing power parity, surpassed that of the United States in 2016 and is now 22% larger, according to the International Monetary Fund. The Association of Southeast Asian Nations has become the world’s fifth-largest economy, and Asia’s billionaire population has surged by 29.2% since 2018. More than a quarter of the world’s billionaires now live in the ASEAN region.
An increase in ultra-high-net-worth individuals has been accompanied by a growing number of family offices. The Asia-Pacific region saw a 44% increase in family offices between 2017 and 2019, part of a global boom in which half of the world’s roughly 10,000 family offices have been established in the past 15 years. In total, these firms now collectively manage approximately $5.9 trillion in assets.
Singapore has appeal to family offices on a number of fronts. It has a reputation for political stability and is the fourth-largest recipient of foreign direct investments worldwide. In a recent Ipsos survey focusing on major social and political matters across 29 nations, 79% of Singaporean citizens expressed confidence that their nation is on the right path, a stark contrast to the global average of 38%.
This stability is complemented by a regulatory framework that caters to the needs of family offices. For example, the introduction of the Variable Capital Company structure in 2020 has offered tax advantages and privacy protections particularly attractive to these entities. A VCC structure allows funds to accommodate different investor requirements under a single corporate umbrella while maintaining separate sub-funds with distinct investment objectives, policies, and asset pools.
One of the key advantages of a VCC is that it permits both open-ended and closed-ended funds, meaning it can support a wide range of fund strategies and allows the dividend payouts from capital to help managers meet dividend obligations.
The Singaporean government’s proactive approach has also played a role in courting family offices. The Singapore Economic Board and Monetary Authority of Singapore have created the Family Office Development Team to enhance Singapore’s competitiveness and provide a better operating environment for family offices.
And Singapore’s geographic position makes it an ideal base for accessing opportunities across the ASEAN region. This advantageous location is augmented by a deep pool of talent, with the country boasting over 3,000 startups and more than 200 incubators and accelerators.
The Growing South Korean Presence
An increasing number of South Korean family offices have recently been established in Singapore, driven by a combination of economic relationships, tax considerations, and political climate.
Since the establishment of a free trade agreement in 2005, the relationship between South Korea and ASEAN has consistently strengthened. ASEAN currently stands as South Korea’s second largest trading partner and investment destination, trailing only China.
Tax considerations play a significant role in this migration. South Korea has one of the highest inheritance tax rates in the developed world, potentially reaching as high as 50%. By contrast, Singapore has no inheritance tax, making it an attractive destination for wealth preservation.
Recent political developments in South Korea have further increased the appeal of Singapore’s stable political and economic environment. The defeat of a party seeking to reduce inheritance taxes in the April 2024 legislative election may prompt more wealthy Koreans to consider offshore options for wealth management.
EquitiesFirst Financing
As family offices flock to Singapore, they’re bringing with them not just assets, but a need for financing new investments. This is where EquitiesFirst’s equities-based financing model comes into play.
EquitiesFirst enables clients to free up capital financed against the value of their publicly traded securities. A family office can use this liquidity for a variety of purposes while retaining long-term exposure to their assets. This financing typically comes with favorable interest rates, usually between 3% to 4%.
Many family offices hold significant stakes in public companies, often tied to their family’s business legacy. EquitiesFirst’s financing model allows them to access immediate liquidity based on these strategic holdings, liquidity that can fund further investments in the fast-growing industries and economies of the ASEAN region.
The capital provided by equities-based financing can also be used to diversify into new asset classes or markets, a crucial consideration for family offices looking to spread risk and capture new opportunities.
Family offices in Singapore are increasingly engaging in coinvestment opportunities, philanthropy, and even startup incubation. The liquidity provided by equities-based lending can fuel these activities, potentially accelerating innovation and economic development across the region.
As more wealth flows into the country, it’s catalyzing the development of a sophisticated ecosystem of financial services tailored to the needs of ultra-high-net-worth individuals and their family offices.
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