The rich are flocking to Singapore; bankers stick with Hong Kong

Wealth overseen by the asset management industry has doubled in just six years, to about US$4 trillion ($5.45 trillion), according to central bank figures, and about 80% of that is foreign. BlackRock Inc. is expanding in Singapore, as is the Ontario Teachers’ Pension Plan, which shut down its equity team in Hong Kong this year. Even Swiss banks are getting into the act: UBS Group AG’s offices dominate an entire city block in a prime shopping district, with a staff of 3,000, a private gym and a cappuccino bar. It’s now the firm’s largest operation in Asia.

“There’s not just one subsegment that’s suddenly hot on Asia—we’re seeing allocations from everyone,” says Mark Voumard, co-founder of money manager Gordian Capital Singapore Pte. Singapore “has momentum, and once something has legs it’ll continue to run.”

Switzerland’s crown as the leading home for globe-hopping wealth is safe for now. But Boston Consulting Group projects Singapore will see foreign wealth booked there grow by 9% over the next five years, three times faster than its Swiss competition. It boasts many of the attractions of Switzerland, including political stability and a highly educated workforce. It also features low income tax rates, zero levies on capital gains or inheritances and incentives for multinational firms to establish Asian headquarters. Singapore’s prime location in the middle of Southeast Asia makes it attractive to investment managers focused on the region.

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The rapid rise of money management is by design. In 2020 the government introduced a new kind of legal structure called a variable capital company that provides tax and legal incentives for hedge funds, venture capital and private equity firms to set up in Singapore, similar to programs in such offshore hubs as the Cayman Islands and Luxembourg. More than 600 companies had taken advantage of the new program as of last October.

Some of the world’s largest money managers have staffed up in Singapore, including Marshall Wace, Griffin’s Citadel ­Enterprise Americas and D.E. Shaw. Billionaire Cohen’s Point72 Asset ­Management has expanded its Singapore team more than 50%, to 100 people. Overall, hedge fund assets grew 30% in 2021, to $257 billion —making for the biggest dollar increase on record, according to the most recent data from the Monetary Authority of Singapore, the city-state’s central bank.

The number of family offices—firms that manage the lives and wealth of rich clans—climbed to 1,100 at the end of last year, from just 400 in 2020, according to MAS estimates. Among the incentives: tax changes in 2019 and a program that provides a fast track to residency for the ultrawealthy. “Singapore will continue to benefit from wealth and asset flows,” said Piyush Gupta, chief executive officer of DBS Group Holdings Ltd., the country’s biggest bank, in a written response to questions. “Singapore benefits from being a safe haven, having an efficient financial system and being a bridge between East and West.”

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Recent troubles in other financial hubs give Singapore an extra edge. Switzerland’s status was shaken this year by the ­collapse of Credit Suisse Group AG and its hastily arranged sale to next-door rival UBS. Credit Suisse has seen outflows of more than 100 billion Swiss francs ($149.76 billion) as rich clients park their money elsewhere, including in Singapore. As IMD business school professor Arturo Bris noted at the time of the merger, ­“Singaporeans are opening the Champagne” over the bank’s failure.

In Hong Kong, bankers and investors are becoming increasingly uneasy about political crackdowns by China, with worries made worse by rising tensions with the US. Hong Kong just lost its five-decade-long position as the world’s freest economy to Singapore, according to the most recent ranking compiled by Canadian think tank Fraser Institute, which cited more restrictive regulations and the erosion of judicial independence in the Chinese city. Dwindling business from the mainland, which is suffering an economic slowdown and a real estate crisis, is prompting financial firms to cut jobs there.

Still, Singapore has its own challenges. Its squeaky-clean ­reputation—it ranks fifth-best in the world on the Corruption ­Perceptions Index published by Transparency International—has recently taken a hit from scandals. The transport minister was arrested in a graft probe and released on bail, while two lawmakers unexpectedly resigned over an affair. Separately, in August, authorities charged 10 foreigners with money laundering and have confiscated more than $2.8 billion of assets including properties, luxury cars and cash.

The mess has ensnared some of the world’s biggest banks and prompted authorities to increase scrutiny on foreign money flows. It’s also cast a shadow on the family office business: Minister of State Alvin Tan said in parliament on Oct. 3 that one or more of the accused may have been linked to family offices. While the government welcomes legitimate business, Tan said, the MAS has recently announced plans for tighter anti-laundering controls for family offices and will consider if further safeguards are needed.

Meanwhile, in the battle to be Asia’s top financial centre, the balance remains in favour of Hong Kong, at least as far as Wall Street is concerned. Hong Kong is still the first stop for businesses looking to crack the world’s second-largest economy; Singapore’s economic backyard in Southeast Asia is far smaller. The 10-nation region has a population of 680 million and an economy of US$3 trillion, compared with China’s 1.4 billion people and US$18 trillion economy. While ­Singapore has been luring some Chinese wealth, Hong Kong is still loaded with high-net-worth clients for bankers; it’s home to almost half the hedge fund managers in Asia, according to Preqin Ltd. data.

Some investment bankers who moved to Singapore during the strict Covid-19 curbs are trickling back to Hong Kong. One Wall Street bank has shifted back almost half of those who left, while at UBS about a third of two dozen staffers who relocated have returned, according to executives who declined to be named because the information isn’t public.

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Singapore’s smaller capital market means it can’t compete with Hong Kong on dealmaking or equities, which are among the biggest drivers of Wall Street’s Asia revenue. The total value of companies on Hong Kong’s stock market is about US$5 trillion, more than 12 times Singapore’s US$400 billion. Less than US$20 million was raised from initial public offerings in Singapore in 2023, down 95% from a year earlier. That’s a fraction of the US$3 billion generated by IPOs in Hong Kong, which represents a drop of 68% from the previous year.

A housing boom in Singapore has driven up already high rental costs, closing much of the affordability gap with the historically more expensive Hong Kong. Meanwhile, Hong Kongers in finance tend to earn more. Their average total compensation, including both salary and bonus, approaches US$300,000—52% higher than in ­Singapore, based on eFinancialCareers’ 2022 report. Some financial professionals who made the move between the two cities confess they miss Hong Kong’s nightlife and general chaotic buzz.

The reality for global banks is that Hong Kong is hard to replace. But Singapore is benefiting from companies looking to diversify in the region or for a base for broader Asian operations beyond China. “Banks and financial-services firms in general have opened up bigger operations in Singapore or are going for kind of a dual hub-type strategy in Asia,” says John Mullally, a Hong Kong-based managing director at the recruiting firm Robert Walters.