Over the past decade, the world of wealth management has experienced a significant boom. Singapore has seen remarkable growth in its assets under management, which increased from $1.82 trillion in 2013 to $5.4 trillion in 2021, according to the Monetary Authority of Singapore's (MAS) Singapore Asset Management Survey.
Family offices that cater to the super-rich have been established in Singapore and are expected to contribute significantly to the nation's growing wealth advisory sector, following a period of extraordinary growth. The total number of family offices in Singapore has risen rapidly, from 50 in 2018 to 400 in 2020, and then to 700 in 2021, according to government estimates. Some industry sources estimate that the number of family offices is closer to 1,500 now.
Although the nationality breakdown is unknown, Singapore is a highly sought-after destination for family offices, and authorities are confident that tightening qualifying conditions for tax incentives will not deter investors. From early 2022, family offices are required to have a minimum fund size of $10 million and commit to raising it to $20 million within two years. Additionally, family offices established in Singapore must invest at least 10%or $10 million of their funds, whichever is lower, in the local market.
An Increase in Family Wealth from China
The surge in popularity of Singapore as a hub for family offices can be attributed in part to the increasing influx of family wealth from China. Clients seeking to strengthen their portfolios have been drawn to Singapore's reputation for good governance, rule of law, and stability as an international financial center.
As the global economic center of gravity has shifted to Asia, there has been a corresponding increase in wealth accumulation, particularly in China. According to the Hurun Global Rich List, China accounted for over 60 percent of the world's new billionaires in 2020.
In the aftermath of the 2019 mass protests and China's tightening grip on Hong Kong, many investors have chosen to move their money from Hong Kong as a hedge. This has resulted in concerns about parking wealth within Beijing's jurisdiction for the long term. In 2022, Hong Kong lost 3,000 high-net-worth individuals, while Singapore gained 2,800, according to Mr. Rupert Hoogewerf, chief researcher of the Hurun Wealth Report.
Assets held in Hong Kong are not subject to foreign exchange capital controls imposed in China and can be easily transferred to other financial centers like Singapore. Hong Kong has over 20 international investment and protection agreements with other economies that facilitate two-way investment flows.
China's three-year zero-Covid policy has led many high-net-worth individuals to reconsider the wisdom of storing their wealth there. The authorities' recurring citywide lockdowns, impractical travel rules, and other economically damaging measures such as restricted movement and sealing the country off from the rest of the world have all contributed to this shift.
Despite recent reassurances from Chinese Premier Li Qiang that China is committed to promoting a business-friendly environment and the agenda of growth and recovery put forth by the Two Sessions in March, the country is still seen as a good place to make a fortune but less so to park money.
Singapore's Expertise in Wealth Advisory and its Trade Connectivity
Family offices can be used as a means for immigration to countries such as Singapore, which has a Global Investor Programme offering permanent residency to eligible investors. Singapore's strong bilingual education system and high standard of living also make it an attractive destination for wealthy Chinese looking to move their families and provide their children with a good education and premium living environment. Notable individuals who have relocated to Singapore include Shein founder Chris Xu and Haidilao founders Zhang Yong and Shu Ping.
As a financial centre, Singapore offers a combination of technical competence and expertise for the ultra-wealthy looking to protect their legacy. It has a wide range of sustainable finance, accounting, international arbitration, and other professional services, as well as an ecosystem of sustainable finance and private equity firms, and wealth-friendly regulations. In 2020, Singapore launched a new variable capital company fund management framework that gives family offices more flexibility in redeeming investments early and access to co-funding of qualifying expenses from the MAS.
Singapore's appeal to wealthy investors looking to diversify their portfolio outside of China is enhanced by its gateway to fast-growing Southeast Asia and global trade connectivity. The region is a hub for businesses and start-ups serving a rising middle class and tapping into a young and dynamic workforce, with ASEAN expected to become the world's fourth-largest economy by 2030.
The green and digital economies offer new growth prospects, and Singapore has signed five digital economy partnership agreements with the United Kingdom, New Zealand, Chile, South Korea, and the European Union. With competition becoming more aggressive in China, Singapore is an attractive option for investors seeking to capitalize on these opportunities.
Positive Diplomatic Relations a Benefit
Amidst the ongoing tensions and issues involving the China-US rivalry, the strong and thriving relationship between Singapore and China serves as a great reassurance to Chinese investors that Singapore is a reliable place to invest their wealth. The two nations hold their bilateral ties in high regard, with the recent visit of Singapore's Prime Minister Lee Hsien Loong to Beijing exemplifying this. During his visit, he met with China's four most senior leaders and they agreed to strengthen their partnership and explore new areas of collaboration in various fields including finance, aviation, and the digital and green economies.
Decades of mutually beneficial cooperation have established a strong sense of trust between the two countries, making Singapore a well-respected and trusted investment destination for Chinese investors. Singapore is recognized within China for being the earliest and most fully involved country in China's reform and opening up after the 1970s. Furthermore, Singapore continues to be deeply involved in China's regional development, as evidenced by the numerous government-to-government projects in cities such as Suzhou, Tianjin, Chongqing, and Guangzhou.
Despite the challenges posed by the COVID-19 pandemic, bilateral trade between Singapore and China remained strong, with Singapore's merchandise trade with China increasing by 9% to reach $175 billion in 2022 according to the Ministry of Trade and Industry. Singapore has also been China's largest foreign investor since 2013, with its top three banks - DBS, UOB, and OCBC - establishing a strong presence in many major Chinese cities.
Looking ahead, the bilateral economic outlook appears positive, as Singapore and China are working together to enhance the China-Singapore Free Trade Agreement, which is expected to provide a further boost to bilateral trade and investment.
Sought-After Destination for Family Offices
As a premier financial hub in Asia, Singapore is rapidly becoming a preferred destination for family offices, with Chinese billionaires showing keen interest. Singapore's reputation for efficient governance, robust regulatory framework, advanced infrastructure, and pro-business policies have long made it an attractive investment option for affluent businessmen, wealthy families, and tech entrepreneurs from around the world.
The growth of family offices in Singapore not only reinforces its competitiveness in the financial sector but also benefits the wider business community. However, the rise in demand for experienced professionals to manage family offices raises questions about whether local talent can keep up. Additionally, the entry of the super-rich class into Singapore may raise concerns among Singaporeans about increasing property prices and the surge in demand for luxury cars.