Family Offices looking for Global Diversification The intent for most family offices to look at an international jurisdiction is diversification beyond their home bias, as over 99% of the assets are invested in India. In rupee terms their portfolio would have delivered a IR 10-12% , but if you consider this in dollar terms the return on investment may be closer to inflation adjusted returns and hence not much growth. This becomes important as families across generations are becoming global citizens and hence it is critical for their portfolio to be tracked in dollar terms.
Policy Changes that increased Singapore’s appeal drasticallyFrom 2017 to 2022, we have seen the number of new family offices setting up shop in Singapore increasing dramatically from sub 100 to over 700. The major reason for this rise is regulatory changes.
In March 2019, MAS and the Singapore Economic Board (EDB) jointly established the Family Office Development Team (FODT) to enhance Singapore’s competitiveness as a global wealth management and family office hub. The key role of this team was to enhance the operating environment for family offices, deepen capabilities of family office professionals and service providers, and build a stronger community of family offices in Singapore.
In January 2020, Singapore launched the Variable Capital Company structure, one crucial legislation to attract investment funds and extended the same to Single Family Offices.
The pandemic halted the immediate impact of the above regulations, but as the world reopened, family offices started taking note of Singapore’s enhanced appeal. Since early 2022, there has been a surge in the number of Global Family Offices being set up in Singapore.
The Single Family Office (SFO) structures are designed to help establishment of these Family Offices without the requirement of any license or become registered to provide fund management services to the investment vehicles held by an ultra-high net worth family.An SFO which is either licensed to provide fund management services, or is exempt from licensing, is considered to be a fund manager for the purposes of Singapore’s fund tax incentives, by specific provision of Singapore Income Tax Act (Cap 134).
Implications of the Policy ChangesThanks to the introduction of the new rules and regulations mentioned above, Singapore by default has become a preferred destination for Family Offices, considering their business-friendly reputation and low tax rates for individuals, as well as both local business and es , private and public companies.
Singapore continues to be the jurisdiction of choice considering sound financial regulations, strong rule of law, political and economic stability, favorable lifestyle, language, and proximity to India. Post the pandemic, most ultra-high net worth families are considering an jurisprudence move, keep in mind India’s response and challenges during the pandemic.
The trend is set to continue despite tightening of regulationsWe continue to see more and more family offices considering to re-locate to Singapore, even though Singapore tightened the regulation in 2022 with additional measures making it challenging for smaller family by offices, to set inup creasing shop the assets under management requirement, local investments, and business spending for family offices to qualify for tax incentives. Family Offices setup under the section 13O incentive would now require a minimum of SGD 10mn of assets under management, with a commitment to raise D to this 30million within two years’ time.
The establishment of the Global-Asia Family Office Circle (supported by the Singapore Economic Development Board (EDB) and the Monetary Authority of Singapore (MAS) has further augmented the sharing of best practices and learning across family offices. discouraging families that hold largely their operating business within holding companies to be included under the incentive program. The time taken for MAS to approve the structure for the incentive program has gone up from 3months to in some cases even 9 months.
After the flurry of large Family Offices relocating to Singapore like UK Billionaire and owner of Dyson products Sir James Dyson, hedge fund billionaire Ray Dalio, Google co-founder Sergey Brin and former De Beers chairman Nicky Oppenheimer, Mukesh Ambani, India’s second richest is also set to start shop in Singapore. Last week there has been news of India’s richest individual Gautam Adani in consideration of managing his family office assets from Singapore and Dubai.
More and more family offices are leveraging Singapore’s family office friendly jurisdiction, to establish a legacy that extends beyond financial evolution and wealth accretion.
(The author is Sadaf Behbahany, Managing Director, Origination & Client Coverage, Waterfield Advisors)