FUNDRAISING NEWS | November 08, 2024
In an effort to attract the best talent and further cement its status alongside Hong Kong as a family office hub in the Asia-Pacific region, the Monetary Authority of Singapore (MAS) said it will now allow employees of single family offices (SFOs) to invest alongside their employers.
MAS released responses to feedback on November 6 for its July 2023 “Consultation Paper on Proposed Framework for Single Family Offices,” where the regulator proposed that “key employees” in an SFO could hold or manage assets within the company, recognizing a “growing trend where non-family members, such as key employees, invest alongside the family for purposes of alignment of economic interest and risk-sharing.”
In its feedback on the consultation, which closed on September 30, MAS said it will now allow grants of share options to key employees of up to 10% in non-controlling stakes, while also imposing a 10% AUM limit attributable to non-family key employees to “help prevent abuse of the SFO regime.” Additionally, the regulator acknowledged that it will expand its definition of “key employees” from its original proposal to include executive directors, CEOs, CFOs, and investment professionals.
The move comes at a time when establishment of family offices within Singapore is booming. As McKinsey noted in a September 9 report, Singapore and Hong Kong now serve as dual “magnets” for family offices in the region, following a quadrupling of SFOs from 2020 to more than 4,000 combined in both markets. That has led to intense competition with hedge funds and investment banks, who can typically offer better compensation packages than family offices, for talent. The ability to co-invest with employers provides an important recruitment incentive, as the consultant estimates family offices already spend an estimated 45% to 65% of their operating expenses on personnel.
“There is increased attrition in talent, especially in less professionalized family offices,” Aik-Ping Ng and Edith Ang, the heads of HSBC’s Asia-Pacific family office and private banking divisions, respectively, told McKinsey. “Greater efforts are needed to improve retention because when professionals are removed from structured environments like banks, they lose access to critical information, knowledge bases, and networks, which may prompt them to seek new employment opportunities.”
McKinsey estimates that Singapore and Hong Kong together accounted for approximately 15% of SFOs in the world, with the two jurisdictions’ wealth flows sourced primarily from the Asia-Pacific, particularly mainland China, India, Indonesia, and the rest of the ASEAN countries. The consultant said it expects the markets to begin attracting more investment from Europe and North America, driven by global investor interest in portfolio diversification, on top of the tax benefits and clear and increasingly flexible regulations by authorities. The two Asian markets are reportedly second only to Switzerland in managed offshore assets, with approximately $1.3T serviced by each jurisdiction as of 2023.
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