Family offices in spotlight over how much value they bring to Singapore

The family office of former diamond magnates Nicky and Jonathan Oppenheimer of De Beers fame has made over 10 investments in funds and companies managed or domiciled in Singapore, invested in the region, and is planning to grow its four-person team here.

With the spotlight on single family offices (SFOs) here recently, Mr Edoardo Collevecchio, who has served Oppenheimer Generations for more than five years as Chief of Staff, said the portfolio is currently focused on early and growth-stage investments. Its Singapore branch – Oppenheimer Generations Asia – was set up in February 2021.

“These are companies that may be hitting between $300 million and up to $1 billion in enterprise value. By focusing on the venture stage, we get to build relationships with the founders as partners, and plant seeds for the future, because early-stage companies will eventually scale up,” he added.

Oppenheimer Generations, which also has offices in Johannesburg, London and Jersey (Channel Islands), wants to tap economic prospects in Asia.

The hope is that a presence in Singapore will spur investments between this region and its home market of Africa, said Mr Collevecchio, who was joined by Ms Ong Yiling, formerly of Singapore’s investment company Temasek, as Head of Investment.
 

“There is a dual objective for the Singapore family office – to generate economic returns and get access to the Asia market, and to boost investment synergy between Singapore and Africa. It is both a platform and an investment vehicle,” he noted.

“As part of our long-term strategy in Singapore, we are committed to exploring how we could expand our footprint beyond investments over time, by leveraging our existing commercial, philanthropic and thought leadership activities,” he added.

The Oppenheimer family, according to the Bloomberg Billionaires Index, has a combined net worth of US$8.2 billion (S$11 billion), largely through the 2012 sale of its stake in De Beers, the world’s largest diamond producer, for US$5.1 billion. It is among a growing number of wealthy entrepreneurs flocking to Singapore.
 

Rapid growth

While the industry is still relatively new in Singapore, the economic impact of family offices has come under the spotlight following a boom in the past few years, as the country rebounds from the Covid-19 pandemic and maintains relative economic stability amid an uncertain geopolitical environment.

The number of SFOs awarded tax incentives by the Monetary Authority of Singapore (MAS) increased to 1,100 as at end-2022, up from 700 in 2021.

Ms Dawn Quek, a lawyer who heads Wealth Management Practice in Singapore at law firm Baker McKenzie Wong & Leow, said potential clients are increasingly looking at both personal and business interests.

“Immigration is a big part of it – because the stability and safety of Singapore, the quality of its education system, its geographic location, and also the way that it has dealt with the pandemic, have made it quite an attractive place and immigration destination for these families,” she noted.

Ms Sim Bock Eng, Wong Partnership’s Head of Specialist and Private Client Disputes Practice, said the rapid growth of family offices here is both a consequence of the drive by the Government and factors such as the pandemic.

In March 2019, MAS and the Economic Development Board jointly established a family office development team to enhance the nation’s competitiveness as a global wealth management and family office hub.

“It put in place a nurturing operating environment for family offices which included tax exemption and a light-touch regulatory regime for investment activities carried out by family offices,” Ms Sim said.

“In 2020, with the pandemic, Singapore was an attractive destination of choice for many high-net-worth families because of its geographical location, excellent medical hub and good management of the pandemic, and its expertise as an investment and wealth hub.”
 

The issue has been on the minds of Singapore’s lawmakers, who have filed numerous questions in Parliament over the past year, amid a number of media reports on how more of the ultra-rich – especially from China – have made Singapore their base for financial asset and estate planning.

Among them was Tampines GRC MP Desmond Choo, who in October 2022 asked about the Government’s plans to work with family offices to deepen investments in local companies. Mr Choo, who sits on the Government Parliamentary Committee for Finance and Trade and Industry, said the impact of such capital inflows has been on the authorities’ radar.

“Whenever we have more inflows of capital, the larger concern is whether the benefits outweigh the costs, such as contributing to asset price inflation and worries about newcomers not being able to fit in with local culture,” he told The Straits Times.

He believes family offices should be judged on factors such as who they hire and whether there is a transfer of entrepreneurial expertise that makes them so successful in their home countries.

SFOs can range from two- to three-person outfits to larger set-ups with a headcount of more than 50, managing significant assets worth billions. Those in Singapore hail from not just the Asia-Pacific but also Europe and America, and are looking to diversify outside their home countries.

Google Co-Founder Sergey Brin and tech billionaire James Dyson have each set up investment firms to manage their wealth here.

Ms Shu Ping, Co-Founder of hotpot chain Haidilao, set up a family office here in 2019.

The Government has pointed to how SFOs benefit the economy in two ways: when they employ people directly, and when they create jobs for external service providers such as banks and law firms.

In a parliamentary reply last week, then Senior Minister Tharman Shanmugaratnam said that as at June 2022, SFOs that have been awarded certain tax incentives employed about 1,400 Singaporeans and permanent residents.

About 900 of these jobs were created in just the last three years, he noted, adding that these are generally well-paying. Two-thirds of the Singaporeans and permanent residents at these offices earned more than $5,000 a month. More than 400 earned between $2,000 and $5,000 a month, and fewer than 50 earned less than $2,000.

Some Singapore businesses, such as car-sharing firm GetGo, have also benefited from investments made by wealthy families. The startup raised $20 million from family-led investment firm Treis Group earlier in 2023.

GetGo Chief Executive Toh Ting Feng said the significant investment “allows us to hasten the electrification of our fleet and extend our technology leadership in shared and sustainable mobility”. It currently has a fleet of about 2,500 cars, including about 200 electric vehicles.

It is this belief in such payoffs that has led advocates to ask for more time and support to grow the industry.

West Coast GRC MP Foo Mee Har, in a Parliament speech in April, said family offices could allow Singapore-based businesses to benefit from their networks, innovation and talent, as she called for more to be done to orientate them to the country’s norms, values and ways of working.

Family offices are typically extremely private, she noted. “Recent reports of flashy and ostentatious behaviours are restricted to a minority.”

At an annual report briefing last Wednesday, MAS Chief Ravi Menon said wealth inflows into Singapore have little effect on the exchange rate, domestic inflation, property prices or car prices, as most wealth managed here is invested outside the country.

He attributed the rise in inflation mainly to sharp increases in global energy and food prices, and stronger domestic wage growth.

Mr Menon pointed out that the bulk of wealth flows into Singapore come from institutional investors, and not family offices or high-net-worth individuals.

Foreigners accounted for an average of 4 per cent of private residential property transactions over the last three years, he noted, adding that there were no purchases by SFOs in that period. Their foreign employees accounted for “an insignificant number” within the 4 per cent, he added.

“Likewise, SFOs and their foreign employees account for a tiny proportion of car purchases in Singapore,” he said.

New requirements

More is being done to ensure more positive spillover effects from SFOs. Mr Menon said the authority will be adjusting tax incentives for SFOs to encourage them to deploy their capital more purposefully to benefit Singapore and the region, as well as increase their contributions towards environmental and social causes.
 

Among the changes he announced is a new requirement for SFOs to hire at least one investment professional who is a non-family member. This is meant to expand the pool of jobs for such professionals here.

On its part, Oppenheimer Generations has spent more than $4.5 million on operation costs, service providers and fees to Singapore-licensed fund managers.

When asked about the SFO’s contributions to the Singapore economy, Mr Collevecchio said family offices “represent multi-generational, patient capital and often have a much longer time horizon than most investors and corporates”.

“As such, it is difficult to make a final verdict about the experience to date – most families’ strategies will mature over time, and it would be more appropriate to measure their contribution to and assimilation into society over years and decades,” he added.

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.