Stephen Diggle, who co-founded a hedge fund that made $2.7 billion for investors in 2007 and 2008, set up a family office
to manage the millions in fees he earned, instead of entrusting his wealth to private bankers.
“It was fairly demonstrably clear that there was a very significant problem of alignment of interests by private banks and
their customers,” said the founder of Vulpes Investment Management, whose Singapore-based family office has invested
in hotels in Japan and farms in Uruguay. “They ceased to be custodians of people’s money and they became salesmen.”
Asia’s wealthiest investors, whose ranks are swelling as the region’s economic growth outperforms the rest of the world,
are turning to family offices to maintain control of their money after the collapse of Lehman Brothers Holdings Inc. in
2008 made them more risk averse.
“Private banks try to sell you everything and not necessarily what’s best for your family office or for yourself,” said
Clinton Ang, managing director of Singapore-based wine and spirits distributor Hock Tong Bee Pte, who is among those
preferring to manage his family’s wealth himself. “If sophisticated investors haven’t already learnt the lessons of the
past crisis, with the impending crisis that is on the horizon they’d better.”
Family offices are typically tailored to the families’ investment and personal needs, and often include estate planning,
philanthropy and lifestyle management such as maintaining homes and yachts. Private wealth managers, who generally work
for global investment banks, rely on fees and commissions from managing their clients’ money.
Most family offices in Asia are more defensive in their investment strategy and tend to hire a “generalist” to manage their
wealth, rather than specialists such as former hedge fund managers, said William Chan, chief executive officer of
Singapore-based Stamford Privee, which manages his family’s wealth and that of two others. Such managers may cost a family
office between $300,000 and $400,000 a year, while specialists would be more expensive, Chan said, citing U.S. surveys.
“Being the trusted adviser is key,” Chan said. “Failure to retain talent in a buoyant market will usually be the cause of
the office’s failure. Right hires are managers who have a strong streak of loyalty to the family and who will not be easily
swayed by other offers.”
“Most families prefer to set up their own family offices with a combination of their own employees and external experts,
with specialist skills ranging from accountants to legal and tax advisers to investment professionals,” said Hong Kong-based
There are about 50 established family offices in Asia outside of Japan that are managed professionally.
Worldwide, there are an estimated 2,500 to 3,500 family offices, said Joseph Reilly, president of the Greenwich,
Connecticut-based Family Office Association. The first family office was established in the U.S. by oil baron John D.
Rockefeller in 1882 to manage his family’s assets.
Some family offices cater to more than one family to gain economies of scale. It costs at least $1.5 million a year to run
a family office that includes an investment team, and a family will need a minimum of $100 million to justify the expenses,
said Chan of Stamford Privee.
Blue Ocean Capital Partners, a unit of Singapore-based private-equity firm Tembusu Partners Pte, plans to set up an office
with a U.K.-based family firm this year, said Director Daniel Lin.
Lin said he and his father, who founded Tembusu Partners, will start by managing the wealth of their family
with the help of a chief executive officer. At least two other families have agreed to partner with them later, he said.
“For private banks, because they have certain targets, they need to find something that will give them a financial return
pretty quickly,” Lin said. “For us, we’re not in a hurry to make money out of this; we have time to build on the intangibles
such as family values and governance.”