At first sight, Asia is just about the perfect market for family offices and these entities have been expanding fast, so industry figures say. Smaller offices, however, may struggle without offering innovative ideas, this article argues.

The following article is by Shirley Crystal Chua, founder and chief executive of a Singapore-headquartered multi-family office, Golden Equator Capital, founded in 2012. The business operates three funds: Golden Equator Development Fund I, Golden Equator Technology and Innovation Fund and Golden Equator Prime Currency Fund. Additionally, it has more than $250 million of client assets. (Golden Equator Capital works with a number of private banks to provide investment advice for clients based on their risk tolerance, return objectives, experience and global dynamics. There is no pressure or quota in terms of cross selling, the firm told this publication when asked about the matter. The funds among a number of options for clients and some the funds were created in response to some clients' interest. The firm added that its own fund range belongs to the private equity arm of GEC which operates separately from the asset management team.)

The Asian market for family offices is still in its relative infancy. But with so much wealth in the region held by families, the market for single and multi-family offices looks promising. Recently, for example, Fusang Family Office, based in Singapore and Hong Kong, was formed. According to Fusang, a trillion dollars are expected to pass down through generations over the next few decades, but 88 per cent of Asian families are said to be unprepared for this wealth transition (source: JP Morgan Private Bank, April 2015). In December last year, UBS told this publication that it is seeing "exponential growth in Asia in family offices".

These comments do not necessarily reflect the views of this news service, but the editors are pleased to share such insights and invite readers to respond.

There are more millionaires in Asia than in North America today. With this increase in wealth, Asian families are looking for ways to protect, expand and pass it down to the next generation. The growth of multi-family offices in Asia demonstrates not only the growth in wealth in Asian families but also the fact that MFOs differentiate themselves from each other through their service and product offerings.

In particular, MFOs in Singapore continue to evolve in terms of their innovation and technology offerings to satisfy the wealth succession and management needs of the affluent rich families in the region.

A multi-family office serves as an independent advisor to families whose wealth may not be substantial enough to sustain a single family office, or to families who are interested in co-investing with other wealthy families in some investments.

When I founded Golden Equator Capital in 2012 the erosion of trust in banks due to the 2008 financial crisis was one of the driving forces for clients to look for alternatives in managing their families’ wealth other than by banks during that time. Over the past four years, GEC has grown eight-fold from about a dozen clients and assets of around $30 million to AuM of more than $250 million today. While we see potential clients still struggling to rebuild their trust in banks, another driving force for the strong demand for MFOs is the tailored, holistic approach MFOs can offer for family succession planning without any cross-selling rationale behind their investment advice – something beyond what traditional private banks can offer.

Successful MFOs provide unique offerings
MFOs need to provide solutions to families in making decisions as well as maintaining their portfolios. One of the issues clients usually face is to keep track of their assets, which are often spread across the world and in various asset classes. We are equipped with the technology that allows us to consolidate a full portfolio of local and global investments for clients, under different asset forms across various financial intermediaries, so that we are also able to help manage and provide clear overviews of their assets more efficiently.

The increasing sophistication and aspiration of next-gen successors in wealth management also explain why families prefer MFOs for their unique offerings. Business succession plans are different from what they were 10 years ago. Today, next-gen successors are allowed more autonomy in terms of personal aspiration.

Expanding offer beyond wealth management
While clients are cautious about making investments due to market volatility, my team has seen a growing trend of investors devoting a bigger share of their portfolios to technology and private equity. For instance, these assets used to account for about 5 per cent of our portfolios; the proportion has increased to approximately 10-20 per cent.

To cater to our clients’ needs, we have our own Technology and Innovation Fund that invests in start-ups, in the seed and series A rounds as well as SMEs, which allows clients to capture the growth in technology in a timely manner. This is complemented by our consulting arm, Golden Equator Consulting, which helps our investee companies in operational areas including digital marketing, sales and distribution and branding to bring their ideas to life. We have also lined up a team of "portfolio mentors" who are themselves business owners, chief executives, angel investors and specialists in a range of industries, to give advice and help with networking based on the specific areas of expertise that we see as beneficial to the portfolio companies.

We foresee that technology will be the next wave of growth and the magnitude could be as robust as the property market growth in Singapore 10 years ago. This resonates well with our clients.  

Singapore has the edge of multilingual and multicultural
With Singapore looking to develop itself into a leading wealth management centre in Asia, other Asian markets, in particular China, continue to attract MFOs' attention globally. We also should see an increasing number of European family offices setting up in Singapore to take advantage of the increasing opportunities in Asia. While capturing these opportunities will remain challenging, Singapore will have an edge due to its multilingual and multicultural capabilities over its peers in the region.

But first of all, more consolidation will need to happen. Smaller MFOs are struggling and will eventually consolidate into bigger groups, so that they can share elements such as research, infrastructure and clients. Against such a competitive landscape, MFOs need to also look for more creative ideas to grow investments and hence portfolio returns in order to keep up.