The recent spate of billionaires buying Good Class Bungalows (GCBs) costing eight or nine digit figures here in Singapore should not raise any more eyebrows. For years, the city-state has built a reputation as the ideal place to park and manage their riches while feeding the booming asset and wealth management industries.
Wealth has grown in Singapore, and this is evident as the number of billionaires in the city has increased from just 23 in 2014, to 30 in 2019. That number is expected to reach 38 in 2024, according to data from Germany-based global research firm Statista.
Credit Suisse estimates that there were some 270,000 millionaires in Singapore last year, representing 5.5% of the total population. This number is expected to increase by over 60% in 2025.
In the near two decades The Edge Singapore has been in existence, the dollar value of assets entrusted to managers here have been surging. According to the Monetary Authority of Singapore (MAS), total assets under management by Singapore-based managers in 2002 was $343.8 billion, up nearly 13% from 2001. By the end of 2019, this number has shot up around 12-fold to $4 trillion.
In a cover story published by The Edge Singapore (Issue 91, Dec 1, 2003 — picture, top left), we focused on the thriving wealth management sector who were actively wooing rich Asians. Singapore had then carved a niche for itself as the “go-to” place for high net worth individuals (HNWIs) to manage their money.
A HNWI is someone whose liquid assets are worth at least US$1 million ($1.3 million). Apart from entrusting wealth managers to help grow their money, HNWIs also engage wealth management services to ensure that their money is properly being allocated for the next generation.
Growing wealth for the wealthy
In 2006, the private banking sector boomed. The Edge Singapore then noticed people switching their jobs to become private bankers, as local professionals clamour in droves to jump on the bandwagon.
In our cover story in Issue 223 (July 3, 2006 — picture, top right), the private banking sector emerged as one of the biggest growth drivers in the industry. Insiders say private banking assets as well as revenues that private bankers earn in Singapore are growing close to 25% per annum. There were also stories of a new private bank opening almost every other week in the city-state then.
The industry frenzy reached new highs in December 2007 when sovereign wealth fund GIC, which manages Singapore’s reserves, paid US$9.75 billion for a 5.1% stake in UBS — the largest wealth manager — via a convertible bond issue.
Seen as an opportunistic buy amid the rapidly unfolding sub-prime crisis, UBS was for a while dubbed “Union Bank of Singapore”. The stake was later pared in the middle of 2017, at a loss estimated US$3.5 billion. “GIC made the UBS sale despite the loss, because conditions have changed fundamentally since GIC invested in UBS in February 2008, as have UBS’s strategy and business,” said GIC’s CEO Lim Chow Kiat then.
Some wealth management players maintained an appetite of their own. Asia-based players were eager to grow, but they also found willing sellers in the form of Western banks struggling to gain scale quickly enough. Some of them were also undergoing restructuring, having received bailouts from their governments during the Global Financial Crisis (GFC).
By acquiring the competition, the wealth managers gained instant access to both experienced client advisors and clients. In October 2009, OCBC Bank paid US$1.5 billion for Dutch banking giant ING Group’s private banking unit in Asia, chalking what was then the biggest deal in the private banking industry since the GFC.
“We are not embarrassed in any way or surprised by the fact that we paid what we think is a healthy price for the franchise,” then OCBC Bank CEO David Conner said. “This is a rare opportunity to acquire an Asian private bank franchise.”
The wealth management industry slowed down in 2014, but that did not stop DBS Group Holdings. In an article published in Issue 618 (Mar 24, 2014), DBS had just acquired Société Générale’s private banking business in Singapore and Hong Kong, as well as selected parts of its trust business for a consideration of US$220 million. The price tag is equivalent to 1.75% of Société Générale Private Bank Asia’s (SGPBA’s) assets under management of US$12.6 billion as at Dec 31, 2013.
New trends emerging
This slow industry growth did not dampen the outlook of analysts back then on DBS’s acquisition, as most saw this deal as “accretive”. The industry, in any case, has weathered the numerous economic challenges, ranging from the GFC where markets in this region offered shelter from the storm in the US, to the current pandemic where the affluent took advantage of the market correction.
When the rebound happened, this made the already widening wealth gap even bigger.
As the younger generation of affluent investors surface, new trends emerge. A common quip among private bankers is that the next generation clients do not want to bank where their fathers do. Similarly, the new investors do not want to just invest in the traditional stocks and bonds their parents own.
The Edge Singapore has been keeping an eye on the alternative investment space and have covered interesting products that have caught the attention of investors and wealth managers alike.
Published in Issue 968 (Jan 25 — picture, bottom left), The Edge Singapore took a look into the cannabis industry. The view of cannabis — especially medical marijuana — as a “safe drug” remains controversial, as most countries maintain laws against its possession and use. However, the drug has gained wider acceptance, particularly in North America. This is expected to continue over the near-term.
The way our analyst sees it, the best way to gain exposure to the marijuana value chain — and for investors seeking higher-than-average risk — is to invest in cannabis ETFs.
While the debate to legalise marijuana continues, another large trend that has been taking the world by storm is cryptocurrency. From the likes of Bitcoin to Ethereum, these digitised tokens have seen their value skyrocket in a very short time. Volatility for these assets are high, with surges and plunges of over 25% possible in just a single day.
As recently as two to three years ago, no one in the financial services establishment had a good thing to say about cryptocurrencies. Accusations of the digital asset being a fraud or a purely speculative instrument were regularly hurled by the titans of the financial world. “We see Bitcoin as a bit of a Ponzi scheme,” said former DBS Group chief information officer David Gledhill in a 2017 CNBC interview.
In a cover story published in Issue 970 (Feb 8 — see main picture, bottom right), The Edge Singapore found that several investors, especially the tech-savvy ones aged between 20 to 40 years old, are putting their money into cryptocurrencies. Asian wealth management platform Q9 Capital admits that it has seen a spike in interest in cryptocurrencies since January this year as several cryptocurrencies surged in value at the end of last year.
The growing interest in such alternative instruments has compelled the wealth managers, always obliged to pay attention to market trends on behalf of clients, to take a hard look as well.
In February — as UBS announced record numbers for FY2020 ended December last year — its president for Asia Pacific Edmund Koh said the bank was staying clear of cryptocurrencies. “We are not for Bitcoin for various [reasons]. One of them is in the issue of KYC [know your customer] and AML [anti-money laundering]. We are very uncomfortable on the AML side,” said Koh, in response to questions about investing in Bitcoin — which had just hit a then-record of more than US$40,000.
Things changed three months later. In May, UBS was reportedly “exploring several alternatives for offering” cryptocurrency investments, acquiescing to demand from its clients.
Bitcoin is now trading at around US$50,000. A growing list of financial institutions ranging from BNY Mellon to DBS have also started offering crypto-related products and investment services to their clients. In Singapore, it seems, both bricks and bytes are investable.
Since launching in 2002, The Edge Singapore has documented every development in the financial industry in the city-state, from the rise of private banking to the ubiquity of cryptocurrency
Photo: Unsplash
