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Asia’s family office frenzy comes with plenty of imposters

Bloomberg
Bloomberg • 12 min read
Asia’s family office frenzy comes with plenty of imposters
View of downtown Singapore. Photo: Samuel Isaac Chua/The Edge Singapore
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As Edoardo Collevecchio was getting ready to speak at a conference in Singapore, he recognized the family office that employed a fellow panellist. But as they exchanged small talk, Collevecchio noticed something was off — the executive couldn’t answer basic questions about his firm and didn’t even recognize the name of an owner.

It soon became clear the ‘executive’ had never worked for the family office directly, and had misrepresented his status. An awkward snip later, the panel went ahead — minus one speaker.

From the conference halls of Singapore to events hosted by top Hong Kong officials, the ubultra-wealthy clans that control family offices in Asia are encountering a new and bizarre problem: fake or exaggerated ‘peers’ created seemingly overnight with little or no substance.

The family office space has become so big, it’s attracting “legitimate players but also people trying to make a quick buck or hustle,” said Collevecchio, the managing director of Oppenheimer Generations Asia, a family office that represents a branch of the clan that once controlled diamond giant De Beers.

The alleged imposters are forcing many in the sector to play detective to distinguish between the real and the fake, according to principals or professionals from 10 Asia-based family offices and six service providers who spoke to Bloomberg News about the issue.

Messaging groups once used to arrange social soirees and golf matches have suddenly become impromptu vigilante groups, with members using their diligence skills to review resumes and firms, in what some have dubbed “going full CSI.”

See also: Singapore’s USD millionaires to grow by over 10% in the next five years: UBS

“The entry barrier is low, founders’ wealth is often private information, and it’s hard to do due diligence,” said Joe Qiao, chief investment officer of Globaltec Capital, an office for the Yeh family of Taiwan chip designer Realtek Semiconductor Corp. “There are chances for misrepresentation and scams.”

At stake is a growing risk of fraud, both for the world’s richest families and the governments rolling out the red carpet to attract them. It could also cause reputational damage to a relatively unregulated industry getting huge tax breaks to set up shop. Multiple family offices with tax exemptions were implicated in Singapore’s $3 billion money laundering scandal last year.

Industry players say the ruse can take many forms. In some cases, as Collevecchio discovered, these alleged imposters exaggerate their role within a legitimate family office to gain access and trust. Other times, they set up a new firm with little money backing it — call it cosplay family office executives — with scant or questionable sources of wealth.

See also: Rich Chinese return to Hong Kong as S'pore steps up scrutiny

While it’s impossible to put a precise number on the wanna-be family offices, most of those interviewed said it’s a growing problem. That’s particularly true in Asia, where governments from Singapore to Hong Kong have offered tax breaks and simplified visas in a pitched battled to be the regional hub for the growing business. Ray Dalio and James Dyson are among the billionaires who have set up these offices in Singapore.

Both financial centres have had family office embarrassments of late. In March, the Hong Kong government hosted its second Wealth for Good summit, an invitation-only event with more than 400 guests designed to attract the global elite. Chief Executive John Lee mingled with captains of industry and boasted of Hong Kong’s “unwavering support for family offices.”

One of the guest speakers was Sheikh Ali Rashed Ali Saeed Al Maktoum, whose website claimed the ruler of Dubai was his uncle. On stage between Mao Zedong’s granddaughter Dongmei Kong and Robert Rosen of the Bill and Melinda Gates Foundation, he spoke about philanthropy and wealth legacy. Bloomberg News and other media reported on his pledge to invest up to US$500 million ($676.1 million) in a Hong Kong family office.

But a day after the event, as media outlets started questioning his background, Sheikh Ali abruptly delayed plans to open the office and left the city, citing “urgent matters in Dubai.” The South China Morning Post later reported his past career was as a singer called “Alira,” and that officials never vetted his identity and financial background before he attended the event.

The United Arab Emirates embassy told the SCMP Sheikh Ali was a member of the Royal Family, without providing further comment. His staff said the family office was delayed until May, before later saying it would open “no later than June.” Repeated emailed requests for comment to the office of Sheikh Ali and his staff, as well as the email address listed on his website, went unanswered.

The Hong Kong government “welcomes all family offices to set up in Hong Kong, whatever the family’s country of origin, provided such offices engage in legal activities,’’ according to a spokesperson for the Financial Services and Treasury Bureau. The government can’t comment on individual cases, the spokesperson said. 

Singapore meanwhile has been dealing with a money-laundering scandal in which the 10 people charged with crimes had at least five family offices among them, according to documents reviewed by Bloomberg News and people familiar with the matter. Investigations by authorities suggested “one or more” of the accused were linked to family offices that were granted tax breaks, the government said. All 10 have been convicted and sentenced to jail terms and the MAS said the linked firms no longer have exemptions.

To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section

Potential money laundering is a key risk linked to wealth inflows including from family offices, according to a spokesperson for the Monetary Authority of Singapore. Bloomberg News reported this week that the agency is stepping up scrutiny of family offices, including a requirement for those awarded tax incentives to have a private bank account in Singapore. Firms must also disclose more information about beneficial owners and relevant staff members.

Main Challenges

When it comes to finding fakes, industry players cite three main challenges.

First, it’s not always clear what constitutes a family office. At its most basic level, family office is a broad label used to describe an organization set up to manage the wealth and affairs of rich clans. These include single family offices that work with one family, and multi-family offices that deal with several at once. Services can run the gamut from private school applications for kids to yacht management and property deals. 

In 2019, when analysis provider Campden Research estimated there were 7,300 family offices managing a combined US$5.9 trillion globally, the rule of thumb was that a typical firm would cost at least US$1.5 million a year to run. That means they would need US$100 million in liquid assets to make it work. For anything below that, it would be cheaper to hire outside bankers and lawyers.

But increased tax breaks and benefits, especially in Asia, have helped to drastically warp what it means to be a family office. While the connotation remains one of fabulous, generational wealth, the reality can be far more mundane. Take Singapore: when its 13R tax exemption scheme was first publicly opened to family offices in 2017, it had no minimum for assets under management.

While the bar has since been raised (the minimum now is $20 million), existing funds were grandfathered and the scheme proved hugely popular. Between 2019 and 2023 alone, the number of single family offices with tax exemptions rose to 1,400 from 200, according to government figures. In Hong Kong, a government-commissioned report by Deloitte in March found that 2,703 single family offices were based there. But 67% of those managed less than US$100 million.

“We don’t have a clear definition of what a family office is,” said Marta Widz, professor at the SDA Bocconi School of Management in Milan. “It’s become another way of attracting wealth — governments would speak about ultra high net worth individuals or billionaires in the past, and now family office is a buzz word.”

The prices here are in USD.

Another factor is that secrecy has long been an industry hallmark. So while suspiciously vague public personas can be a red flag in some sectors, it’s often the norm in the world of family offices. A LinkedIn profile for Marie Young shows she’s worked for a California-based “family office” since 2011, when in fact, she’s the chief investment officer of Google centa-billionaire Sergey Brin’s family office Bayshore Global Management LLC.

So it’s much harder to know when someone is being legitimately or suspiciously elusive, especially in developing markets like Asia and the Middle East that lack the long-established professional networks of Europe and the US.

“This industry lends itself to frauds” since it’s built on secrecy, said Francois Botha, founder of Denmark-based Simple, which services family offices. “Nobody checks the credentials — there’s quite a lack of due diligence.”

And though family offices manage trillions of dollars globally, there are typically no license requirements or regulations for the fast-growing sector. Nor is there a mandatory public registry for these firms.

“Most families would not want to have that visibility — the more money I have, the less I want to be on a register,” LH Koh, head of global family and institutional wealth for Asia-Pacific at UBS Group AG, said during a family office report launch. “That’s why it’s very difficult for us - not just the banks — to really pin down the population size of family offices.”

Hard to Quantify

All this opacity makes it hard to quantify the problem. While the vast majority of family offices who spoke with Bloomberg had met or been courted by what they deemed were imposters, only one came close to buying into an investment scheme that later turned out to be an alleged fraud.

Rena Chai, the executive director of the Family Business Network Asia, had to reject several questionable firms from her conference in Singapore last month. She suspected many were service providers or investors trying to win over clients by pretending to be family offices.

For some, it’s a way to join the in-crowd, getting free access to conferences that would otherwise cost thousands of dollars. As one private equity investor who had encountered several fakes put it: “there is no party like a free conference party.”

“You join Sentosa Golf Club maybe not because you like to play golf but because of the bragging rights,” said Bhavik Doshi, the investment director at the One Hill Capital family office, referring to the Singapore country club that costs about US$620,000 for foreigners to join. “As long as you paint that story of riches and association with grandeur, people almost want to buy into it.”

Ad Hoc Networks

In response, some family offices have created ad hoc networks to review new acquaintances. One family office principal, whose old-money clan has been doing business in Singapore for decades, said a WhatsApp group previously used by next-generation scions for social reasons now doubles as a sounding board.

In a case that started making waves in the tight-knit community last year, one individual ingratiated themselves into various circles by saying they worked at a family office. Invites to networking events, free conference passes and access to a closed-door WeChat group with more than 200 members soon followed. But between the dinners and coffees, some in the industry noticed conflicting stories, according to Medway Investments board director Eric SayWei Neo.

For months, members of the WeChat group delved into this person’s educational background and alleged family office. Some used connections in the US to seek feedback from supposed backers, while others searched holding company records and tapped networks for intelligence.

By March, two lengthy reports were sent to the Monetary Authority of Singapore and the Ministry of Manpower, demanding the person’s employment visa be rescinded. When this firm was listed as an attendee at the Private Debt Investor APAC Forum that month, some participants protested and demanded they be expelled, according to several people familiar with the matter.

‘Full CSI’

Neo said two other people were reviewed, in what one member dubbed the “Full CSI” treatment. The group was planning to prune out inactive and improper members.

“Within the financial industry here everything is pretty tight in terms of connections and reputations so it’s like a match - when there’s a spark it actually burns quite fast,” said Neo.

One Hill Capital’s Doshi has made the conscious decision to cut back on events, which have exploded in Singapore. That gives him more time to meet would-be partners and screen those who might not be what they claim. One firm he met seemed like legit single family office until several coffees and lunches later when they started asking for cash.

For Ming Yan, managing director at Cambridge Associates, a key test is how willing an office is to set up direct meetings with wealth creators and family. Failing to share the origins of that money is a “non-negotiable standard” for doing business.

“There’s a saying in this market that you’re going to kiss some frogs along the way,” said Ming, whose Boston-based firm manages or advises more than US$560 billion for endowments, pensions and family offices. “At some point, the door needs to be open in how they represent themselves and who they’re representing.”

No Systemic Risk

For now, Oppenheimer’s Collevecchio says there’s no systemic risk in Asia’s family office space, nor does he think more regulation would help. For those trying to separate truth from fiction, it pays to spend time with relevant partners and other families, while hiring great staff for due diligence.

“You do a round of WhatsApps and everyone says ‘don’t trust this person’,” he said. “It doesn’t prevent people from playing in the space or engaging in fraud. But over time, the system is fairly self-correcting.”

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