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Europe's old wealth seeks new home in Asia

In the 1470s, the prominent Spinola family of Genoa had an apprentice business agent in Barcelona named Christopher Columbus helping to handle their shipments, preparing the young sailor for his later voyages of discovery to the New World.
Image: To match Feature WEALTH-FAMILIES/ASIA
The Louis Vuitton Island Maison store at the Marina Bay Sands is pictured at dusk against the skyline of the central business district in Singapore in this file photo.Tim Chong / X90043
/ Source: Reuters

In the 1470s, the prominent Spinola family of Genoa had an apprentice business agent in Barcelona named Christopher Columbus helping to handle their shipments, preparing the young sailor for his later voyages of discovery to the New World.

These days, that Italian clan and other ultra-affluent families are moving assets to Singapore by setting up family offices in a city-state often touted as the Switzerland of Asia.

Wealthy people from Europe and the Americas have long looked to the East for ways to build and preserve their fortunes. But only recently have they started opening family offices - private companies that manage the trusts and investments of rich households - in the region in earnest.

"Because Asia has been a place where we've been investing very heavily - more than 50 percent of our assets are in Asia for the last 15 years - we feel a need to come closer," Federico Spinola, son of the family patriarch, told Reuters from New Caledonia, a Pacific archipelago known as the "Land of Eternal Spring".

Campden Wealth, which provides research and data on family offices, says up to 10 European family offices have moved to Singapore since the financial crisis in 2008, bringing $5-$10 billion worth of assets with them.

Singapore, a global banking and investment centre in the heart of Southeast Asia, is an attractive base for its efficient registration process, relatively benign regulations, smooth movement of money, financial infrastructure and low tax rates.

Clean and safe, it also offers high-end shopping, fine dining, casinos, luxury hotels, golf courses and marinas filled with super-yachts to help the wealthy spend and unwind.

Asia's prospects are alluring as economies in Europe and the United States look weak. After the crisis, regulatory pressures in the West and a crackdown on offshore centers have hastened the pace of family offices moving to Singapore and Hong Kong.

"The families want to be where the action is," said Munish Dhall, a UBS executive director and head of ultra-high net worth offering and client development. "They want a piece of the economic pie."

Basically 'shareholders'
Big financial institutions, feeling the pinch of a tougher investment banking climate and higher capital requirements, are taking note - and looking to get their own piece of the action.

UBS, a Swiss banking giant, has set up a family office team that is looking to cater to two dozen clients in Asia who have assets of $200 million or more. Other global players like Credit Suisse and Canada's RBC Wealth are also courting family offices, along with Singapore-based DBS Group.

The Spinolas, whose ancestors include crusaders during the Middle Ages, cardinals of the Holy Roman Empire and influential figures in the politics, culture and prosperity of Genoa, are one of those families. But they are doing things their own way.

Last year, representatives of the family began setting up an office in Singapore to manage their investments in the region, rather than using their Geneva-based operation Parly Company SA.

It is still early days for Parly Singapore as it applies for licenses and tests its bespoke portfolio management tools. The plan is to hire senior investment managers from top banks over the next year, with the 10-15 members of the team working under an advisory fee model rather than on commission.

"We are a family company and the family is not involved in the business. We're basically shareholders," said Spinola, who sits on a management committee with several relatives and now has permanent resident status in Singapore.

By keeping family and investment matters separate and allowing Parly managers to make decisions, he said, "that is a way of differentiating risk."

The Spinolas are clubbing together with two other family offices to cut costs and leverage on efficiencies. Parly officials declined to identify the partners, other than to say they are "household names" in Europe - one is an English entrepreneur who has donated much of his money to charity and the other is a Swiss-based family.

Spinola would not discuss the amount of investment in Parly Singapore and neither would its managing director, Roxanne Davies. But she did give a clue.

"A family office with such a strategy can't really exist - it is not economically feasible - without half a billion," Davies said.

Tougher regulations
Campden Wealth counts about 2,500 family offices around the world. In Asia, it says, there are 150-200 - roughly half in Australia and Japan - but the number is growing alongside the surge in new wealth in China, India and Southeast Asia.

A recent survey by Campden and UBS showed the amounts being managed by these family firms range from $50 million to more than $1 billion, with an average return of 9.1 percent over the 12 months to October 2011.

The goal for the Spinolas and other family offices is simple: control their wealth, maximize returns and minimize fees charged by commission-hungry money managers.

Concerns about the health of big banks and dismay at their hard-sell tactics that pushed products of dubious merit onto high net worth clients - such as mortgage-backed securities that turned toxic - are other factors.

"Singapore is tightening offshore rules but it will continue to be a very attractive place for family and investment offices," said David Bain, Campden Wealth's head of research. "No government in the world is so committed to attracting the money of the ultra-high net worth."

Wealthy families from Europe, more so than Americans, are looking to set up shop in Asia because of the banking situation in Switzerland, Luxembourg and Liechtenstein, said Donald Riegger, a Singapore-based expert on family offices at Deloitte & Touche LLP, a global accounting and advisory practice.

"It's picking up steam," said Riegger, adding Singapore is on the map as a financial centre and as more family wealth shifts to Asia in an overhaul of portfolios.

"I'm not really getting much of a sense that they're fleeing something to come here ... For a U.S. person, they're not going to avoid that (taxes) but if you're a European looking for a better tax structure, Singapore could work well."

Taking care of business
Spinola, who worked at Italian drinks group Martini & Rossi and managed agricultural firms in Argentina before setting up Parly in Geneva in 1993, is no stranger to investing or to Asia.

Now he and his family want a more direct link to how their money is managed in the region, although success is not certain given the volatility of markets and the variety of political, investment and regulatory risks in many Asian countries.

"We are trying to move away from hot money, high-frequency trading and things that have price discovery that we just cannot control," Davies said. "If we are able to target single digit returns of 6-7 percent annualized in today's market, we would think of ourselves as very lucky."

Pending approval from the authorities, she said, Parly will move the "centralized thinking process" from Geneva to Singapore, which has been "very open to new ways of wealth management and financial technology that surrounds it".

Parly's portfolio is more heavily weighted towards equities, with investments mainly in energy, commodities, healthcare and biotechnology stocks. It also invests in mezzanine finance, bridge financing and types of structured credits.

In Asia, Davies said Parly is interested in opportunities in the consumer sector, Japanese innovations and venture capital, especially in technology firms.

If the model works, Parly Singapore will be open to investing on behalf of other wealthy families.

Spinola, whose passions are classical music and animal protection, still has ties to Europe. He owns one-fifth of Tassarolo Castle, built around a Roman tower and nestled among vineyards and fields north of Genoa. One of the buildings is where the Spinolas minted money until the 17th century.

But Spinola has long felt the pull of Asia. Two decades ago, he was "very tempted" to set up a family office in Singapore, Kuala Lumpur, Hong Kong, Shanghai, Beijing or Tokyo but ended up picking Geneva because he felt it was a safer bet at the time.

"In 1994, the choice (in Asia) was much wider," he said. "Now, the options are basically down to two or three - Hong Kong, Shanghai, Singapore."

So what swung his decision in favor of Singapore?

"I have such good friends there," he said. "It really gives me a higher sense of safety. It all comes down to the people you know."