To ask the moneyed to splurge more on hiring local talent, renting office property and buying Singapore assets is a bold move. Yes, the uber-rich had a great 2021: Globally, the number of people with US$30 million ($41.4 million) in net assets or more swelled by 51,000 or 9.3%, according to Knight Frank. But if inflation is making 2022 a hard year for the less affluent, the wealthy have their own set of problems. The war in Ukraine, the slowdown in China, stretched global supply chains, slumping tech stocks, and a hawkish US Federal Reserve are all weighing on investor sentiment. When it comes to expanding, notoriously opaque family investment vehicles that are believed to manage in excess of US$4 trillion worldwide — more than hedge funds — won’t be immune to the heightened uncertainly.
Besides, Hong Kong won’t just roll over. The Chinese special administration region intends to offer its own tax exemptions this year for family offices that manage HK$240 million ($30 million) or more, hire a minimum of two professionals and spend at least HK$2 million ($351,540) annually. It’s a generous deal, which might start looking attractive once the city eases up on foreign travel. Such a convergence with Singapore’s “living with Covid-19” strategy will eventually happen — and the process may have already begun — even though a departure from China’s policy of zero infections may not be publicly acknowledged.
Still, it may not be hubris on Singapore’s part to believe that its proposition is now fundamentally different from its arch rival's. Granted, Hong Kong has about 2,000 more superrich individuals than Singapore, and its equity market is nothing short of a wealth pump. By helping firms raise US$166 billion via public offerings over the past decade — US$100 billion more than Singapore — Hong Kong has minted many billionaires and multi-millionaires before handing them over to the tender loving care of the city’s private bankers.
But these advantages can only shrink. Caught in the middle of the US-China cold war, Hong Kong will now have to position itself as largely the location of choice for about 17,000 ultra-high-net-worth families from the so-called Greater Bay Area, which includes Shenzhen and eight other cities in Guangdong province in addition to Hong Kong and Macau. China’s crackdown on its superstar firms — a massive source of new wealth over the past decade — will also affect the city’s wealth industry.
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Singapore, meanwhile, will pitch its services to rich Indonesians and Indians, besides tapping some of the money fleeing Hong Kong. It will also look farther afield. Google cofounder Sergey Brin’s Bayshore Global opened a branch in the city in late 2020. Around the same time, Ray Dalio, the billionaire founder of Bridgewater Associates, started a Singapore office to run his investments and philanthropy throughout the region. James Dyson, chairman of the vacuum cleaning giant Dyson Ltd., arrived a year earlier with his Weybourne Group Ltd.
To achieve this broader global footprint, Singapore has made a play for the fund management activity typically carried out of Dublin, Cayman Islands or Luxembourg by offering a flexible new variable capital company, or VCC, structure. Branches of a single wealthy family with diverse investment objectives can use the framework to run separate sub-funds, while saving on costs by using a common board of directors and service providers. The city even subsidized up to 70% of VCC incorporation expenses.
While Singapore can afford to be choosy about the kind of money it wants to attract, it will be pickier still about letting in expatriate bankers to help deploy that wealth. Preserving high-paying jobs for locals has become a hot-button political issue. Following an 18% drop from pre-pandemic levels in the number of foreign professionals, managers, executives and technicians on so-called employment and S-passes, the city-state has recently further tightened its visa regime and moved to a points-based system. It will consider, among other things, how an applicant’s nationality contributes to the diversity of the hiring firm.
Twenty years ago, Singapore was gloomy about losing its near-8% economic growth of the 1990s as it stared at an uncertain post-industrial future beyond disk drives and memory chips. Back then, the city was more than willing to play host to all those who came with money — and those who followed its scent. But now it’s a thriving hub of local entrepreneurship in search of a deeper commitment from foreign wealth and talent. Considering the loss of reputation of its rival Hong Kong, it shouldn’t be too difficult for Singapore to get what it wants.
