Growth in Home Offices Spurs Banking in Hong Kong and Singapore
Wealthy Chinese and other Asians are looking to increase control over their wealth. They are doing so by setting up private investment vehicles in Hong Kong and Singapore, which have been referred to as “family offices”.
The boom in family offices can be attributed to favorable government policies that are supportive to trade and investment such as tax breaks and relaxed residency policies.
Although this concept has a long history in the West, the private investment vehicle is a rather novel concept in Asia with less than 500 such entities currently in existence. Considering the rapidly increasing financial strength of Asian investors, this number is projected to rise rapidly.
Asian financial power can be seen in the statistics: by the end of 2017, there were 814 billionaires in the Asia Pacific, representing an impressive 38% of the worldwide population of billionaires. China alone is producing two new billionaires every week, according to a report by UBS.
Lee Wong, the Head of Family Services at the Swiss Private Bank Lombard Odier, said “this year the activity for setting up family offices is definitely more. The growth of family offices in Asia should continue on its current trajectory.”
The rapidly escalating momentum has been aided in part by the growing initial public offerings (IPOs) in Hong Kong. These IPOs witnessed a hitherto unseen $27.7 billion raised in only the first nine months of the year 2017. China’s high-tech companies were the main contributors to this achievement and this transformed many previous millionaires into billionaires.
This year, private bankers estimate that family offices increased by 15 percent by the end of the third quarter, compared to the previous year. Analysts expect a sharp increase in this figure in response to an estimated wealth transfer of $3.4 trillion dollars to the region. According to the UBS report, this transfer will take place over two decades.
This is driving growth in the banking sector as evidenced by the statement made by Stephen Campbell, Citi Private Bank’s Chairman of the Global Family Office Group. In this statement, he described how the bank enjoyed a dramatic rise in clients particularly from Asia. Citi Private Bank currently provides services to more than 1,500 family offices worldwide.
Bernard Fung, the Asia Pacific Head of Wealth Planning at Credit Suisse, said that the bank will establish a service team in Hong Kong in early 2019 in addition to its hub in Singapore. This will cater to the sharp rise in Asian clients.
HSBC Private Banking’s Head of North Asia Ivan Wong expressed optimism in the family office boom explaining that it is expected to last at least a few years. Due to optimistic expectations for growth, the HSBC Asia Private Bank will hire an additional 700 professionals by 2022.
Regional financial firms are also keen to increase their share in the thriving family office boom. Derrick Tan, Bank of Singapore’s Global Market Head said that it plans to significantly increase the number of its asset management professionals.