As is often the case in Singapore’s high-end and luxury hotels, office towers and retail districts, one of the most noticeable features of those sipping cocktails beneath the umbrellas of the Ku Dé Ta nightclub tonight is that most of them are foreigners.
International hub
This is in part because the Singapore Government insists its citizens and permanent residents pay a fee – s$100 for 24 hours, or s$2,000 for the year – to enter the casino. This discourages many locals from visiting (as is the intention), even though they may enter the non-gambling parts of the MBS complex.
But the multinational composition of this Ku Dé Ta crowd also symbolises a key aspect of Singapore’s identity: it has become a major regional hub for people from dozens of nations looking to invest and look after their wealth, to work, or to simply have some fun.
Some have taken to calling Singapore “the Switzerland of Asia”, because of the way its private banking industry has taken off.
This is partly a result of Switzerland’s much-publicised difficulties in keeping its bank secrecy laws intact, in the face of challenges from such countries as the US, the UK and Germany.
“Some of the Swiss banks are seeing their Singapore business beginning to surpass what is coming through Switzerland,” one Singapore- based financial services industry executive told International Adviser last month.
At the same time, though, the ranks of Asia’s own wealthy individuals have grown dramatically in recent years, even as the global downturn has hit the designer pocketbooks of European and American billionaires.
Singapore’s asset management industry saw funds under management climb 12% in 2010 to reach s$1.4trn at the end of the year – a new high, according to a Monetary Authority of Singapore (MAS) survey, which noted that more than 80% of this AUM “was sourced from outside Singapore”.
Asian HNWIs
Assets held by collective investment schemes grew 5% to reach s$33bn, with Asia Pacific markets accounting for 77% of investments, up from 71% in 2009, the MAS said.
Asia Pacific HNWI population ’10
According to the most recent edition of the Merrill Lynch/Capgemini World Wealth Report, for the first time in the more than 15 years the report has been compiled, there are now more high net worth individuals (HNWIs) in Asia (3.3 million) than in Europe (3.1 million). Only the US, with 3.4 million HNWIs, had more people with investable personal assets of at least $1m.
What is more, the report’s authors noted, Singapore’s HNWI population ranked among the 20 fastest growing in the world, alongside such neighbours as Hong Kong, Indonesia and India.
Most importantly for Singapore, it seems that many of these millionaires and multi-millionaires are increasingly looking to keep their wealth in Asia generally, and Singapore in particular, rather than racing off to Geneva, London or New York with it.
STEP survey
A report released last month by the Society of Trust & Estate Practitioners (STEP), based on interviews with STEP’s east Asia members, found only around a fifth said they disagreed or strongly disagreed with the statement that, “Singapore will be the dominant centre for private client trust services in Asia”.
(There was, though, “a big difference in support when the answers were filtered for the jurisdiction the respondent practised in”, since, “perhaps not surprisingly… those from Hong Kong disagreed strongly”, the report’s authors noted.)
“Increasingly, our client base reflects what is happening in Asia, and that is the emergence of middle classes to ultra wealthy individuals,” says Chris Faddy, the Singapore-based head of distribution to non-Japan Asia at Barclays Capital Fund Services, the investment banking division of Barclays Bank.
Recruitment profile
Faddy says that for some time now, “the fastest growing part of private wealth businesses in Singapore is not European expatriates”, but rather, “non-resident Indians, expatriate and mainland Chinese, and Indonesians, among others”.
He notes that “the profile of staff recruitment” is also increasingly coming more from Singapore and other nearby Asian countries – rather than from the UK, Australia or Europe, as was previously the case – because of the importance of “understanding the local issues pertaining to where the clients come from”.
A similar evolution has been taking place at Aberdeen Asset Management, which in 1992 was one of the first of the major UK fund groups to arrive.
Back then, newly-arrived fund managers like Aberdeen’s Hugh Young were investing in Asia, but primarily on behalf of UK investors, according to Aberdeen’s Singapore-based marketing director Patrick Corfe.
Today, Aberdeen has eight other offices in the region – including Hong Kong, Thailand, Malaysia, China, Japan, Taiwan and Australia – yet Singapore still accounts for over three-quarters of the asset manager’s regional FUM total of $92bn, Corfe reports.
Asset gathering
Perhaps more importantly, UK investment trusts and other UK investors are no longer Aberdeen Singapore’s main clients, even though they are still in the mix.
“Now we are mainly managing money for family offices, discretionary buyers, sovereign wealth funds, and global private banks outside the region looking to invest into the region,” Corfe says.
“At the same time we have also been asset gathering within the region, for example introducing Luxembourg-domici led funds into Taiwan or Hong Kong, or creating products for domestic ranges, as in the case of Singapore, which was our first local retail fund market in 1997.”
Asian entrepreneurs.
Franklin Templeton Investments, the US-based fund manager, which has also long been a fixture on the Asia investment landscape, is also increasingly looking to the southeast Asian market to grow its retail fund business, according to Stephen Grundlingh, co-chief executive of the company’s Singapore-based subsidiary, Templeton Asset Management, which manages assets of $45bn.
As International Adviser reported last month, Franklin Templeton is looking forward to marketing funds in Vietnam to local investors and institutions there, through a joint venture with a Vietnamese bank, beginning, it is hoped, next year.
Franklin Templeton’s southeast Asian business has seen a quadrupling of its retail assets over the past five years, Grundlingh notes, with much of this growth attributable to the private banking and HNW sector in Singapore.
Of course, as Aberdeen’s Corfe points out, echoing an often-voiced observation among Singaporean wealth managers, keeping an Asian investor happy – and thus fully invested – is not always as easy as it might be in another part of the world, particularly during volatile times like now.
“In Europe, within the private bank channel, investing is more about wealth preservation, with HNWIs who may have inherited their wealth rather than having created it themselves,” he notes.
“But here, the people with the money are often entrepreneurs, the money they are handing over to wealth managers is freshly-earned, and they are handing it over because they believe the wealth manager can do better than the 15% to 20% return they would get if they kept it in their business.”
Given that average investment returns are expected to be lower over the next decade than they have been in the recent past, as developed economies like Europe and the US de-leverage and emerging market consumers fail to pick up the slack, Singapore’s wealth managers could, it seems, be in for a lively few years.
