The world is changing fast. And with it, the demands of a new generation of wealth stewards who have inherited substantial wealth from family members, and have different priorities and objectives to their forbears. In Asia, where wealth has been created by families in business or through real estate, as Asian cities have blossomed, these next gen investors now have far more complicated lives than before, with homes in Europe, businesses in China, and banking and residency in Singapore for example. Their children are being educated in the UK and USA and their focus is less on manufacturing or agriculture but more on investing and making wealth work for them. With this comes a new focus on impact and sustainability, but not at the expense of profits and progress.
Temasek recently recast much of the intergenerational investment of its citizens’ wealth as “Ecosperity”, a rather clumsy term that nonetheless is redolent of doing the right thing ecologically and in terms of wellbeing, two concepts that are not always obvious bedfellows.
At Milltrust, in the 12 years since we set up our business in Singapore, we have sought to project an image of Sustainable Prosperity. Conscious of the challenges of the rapidly growing, youthful population of most of the developing world, especially South East Asia, we have sought to invest into companies, both public and private, that are respectful of the fine balance between progress and the protection of our finite resources, those that are leading on innovation and are respectful of shareholders rights.
Our Climate Impact Asia program looks for companies that derive at least 50% of their revenues from decarbonisation, and have no glaring failings with respect to social and governance issues. We then use the fee income to fund conservation and biodiversity projects across Asia, with the tangible results that bring immense satisfaction, such as the abolition of the ivory trade or the protection of threatened species. Alone, we realise our efforts are modest, but think of what might be possible if more investors followed the lead of our inspired clients.
So what’s next? With no private pension fund industry to speak of and a local mutual fund industry that is a mere rounding error for the giant asset managers and ETF providers, who now dominate the industry, institutional asset management is being leapfrogged in the region by wealth management, in much the same way that fixed line telephones were bypassed by cell phones. Asset managers have let down their investors, driving down investment returns by group think and passive investing. Meanwhile, deposits in Singapore private banks are ballooning at a record pace surpassing 3 trillion USD, with the APAC region now accounting for 36% of the global assets of Ultra High Net Worth Individuals.
Nonetheless, a recent survey of the clients of private banks in Singapore showed that over 70% were very significantly dissatisfied with their relationship managers, owing to a slew of factors including lack of transparency, an unmet desire for holistic services, lack of personalisation and low levels of personal connection with clients. If the private wealth opportunity is not to go the same way as the race to zero in the asset management industry, where only the biggest players are assumed to be able to win the volume game, and the outcomes for investors measured against their anodyne peer group statistics is abysmal, then a new formula is required.
Step forward the Multi-Family Office. Under this structure, investors sit at the same table with their advisors to evaluate the merits of investment strategies and products. Fees are transparent and aligned with investor outcomes, and access to skill-based investing is prioritised above the commoditised services that can be acquired cheaply but at the expense of returns.
Relationship managers are given the flexibility to offer a far wider array of investment solutions than typically on offer at a private bank, and to benefit from the flexibility that allows them to live and work wherever they choose, with the support of a platform that takes care of all aspects of the business infrastructure including compliance, training, sourcing, payroll and HR.
Milltrust has been working with some of the most sophisticated family members for decades. Building links around the globe with a club of business leaders and industry experts that have allowed us to offer highly remunerative investments in real assets, private equity, hedge funds and venture, from real estate in Africa, to farmland in Australia, infrastructure in Asia, and health and agri-food innovation from leading universities, and wellness and security innovation from top drawer places of learning. Innovations such as the tax friendly ICAV in Ireland and the Variable Capital Company in Singapore, permit asset protection using what has traditionally been the mutual fund legislation rather than trusts.
The stewardship of family wealth is set to dominate the investment landscape in Asia for some time to come, compounded by the challenges faced by the wealthy of Hong Kong who have been coming to Singapore in their droves. With over 25 years of experience in the region and our HQ in Singapore, we are set to focus on this market for the foreseeable future, and all within the framework of Sustainable Prosperity for those who engage with us. Watch this space!
