Family Office in Malaysia: What You Need to Know (2024)

WHEN Datuk Seri Anwar Ibrahim took to the rostrum at the Securities Commission (SC) on June 19, 2023, the market watched with some excitement. Prior to that, a senior Umno politician and a deputy minister had alluded to a potential major move in relation to the ringgit.

As the prime minister (PM) — who is also the finance minister — left the event, capital market players were looking at each other, asking if they had missed something. Well, they didn’t. Anwar did announce a few steps for the capital market. But nothing major or spectacular.

On the longer term horizon, Anwar floated the idea of attracting family offices to Malaysia.

“The Ministry of Finance (MoF) and SC will look at policies to facilitate and attract the setting up of family offices in Malaysia, to promote corporate venturing to drive greater domestic direct investments, and to widen the definition of sophisticated investors,” he said.

Family offices are one-stop firms that manage portfolios of super-rich and wealthy families. Most of the time, they operate quietly, secretively. The reason is pretty obvious. Most wealthy families don’t go around blowing the trumpet of how much wealth they have under their belts. Some family members may flaunt their wealth, but the family heads are usually cool and collected, eschewing unnecessary attention.

This is big business across the causeway in Singapore. The island republic is a known go-to place for people to stash their wealth. And this goes back many years. Anecdotal stories tell us that many of the rich and famous in this region had gravitated towards Singapore when it came to parking their wealth. So, is Malaysia about to break into the club? Is this family office idea a game changer? Not really.

And here’s why.

For a start, unlike Singapore, Malaysia has never been seen as a haven for wealthy families. In fact, the contrary may just be the case. We can safely assume that many of our rich and famous have their money parked elsewhere, with Singapore high on the list.

“Singapore has been building itself up. It has organically been the venue to attract wealth since the Suharto and Marcos days,” said a lawyer handling family wealth.

So, it’s going to be a tough sell on that front. It will be tough to become the London and Luxembourg of the world. You cannot declare and expect people to contemplate coming to the country.

But it would certainly be a lovely idea to have family offices stationed in Kuala Lumpur. If it happens, spillover is welcome.

Let us look at the impact on the ground in Singapore. In one of his final statements as the chairman of the Monetary Authority of Singapore (MAS), Tharman Shanmugaratnam noted that family offices create well-paying jobs locally.

Answering a question posed in the republic’s Parliament, he said that as at June 2022, single-family offices’ (SFOs) that have applied for and been awarded the tax incentives employ about 1,400 Singaporeans and permanent residents (PRs), in what has been described as “generally well-paying jobs”. Providing a breakdown, he said two-thirds of the Singaporeans and PRs employed by SFOs under Sections 13O and 13U tax incentive schemes earned more than S$5,000 (RM17,275) per month.

Shanmugaratnam stepped down from MAS job on July 8 after announcing his decision to run for president in Singapore. Singapore Deputy PM Lawrence Wong has taken over the role of MAS chairman.

In Singapore, family offices are categorised as either multi-family offices (MFOs) that manage third-party assets of two or more families, or SFOs that manage assets belonging to only one family. It is reported that there are some 700 SFOs in Singapore.

What Shanmugaratnam mentioned is just direct employment. The family offices also provided business to a whole host of professionals — bankers, lawyers, financial advisors, tax specialists, art dealers, estate planners and accountants.

One critical requirement for a family office to work is the existence of a supporting ecosystem. You need to have a whole array of services. Does Malaysia have it?

“In Stockholm, when handling IPOs, you can literally walk from the lawyer’s office to your next appointment,” said the same lawyer.

Malaysia will need to provide that expertise and provide them effectively and efficiently if it wants to step up the ladder in the world of capital markets. For now, the family office idea may just be a pipe dream.

Setting up family office in Malaysia

FAMILY offices have the potential to become a focal point of Malaysia’s financial landscape as the government, led by Prime Minister Datuk Seri Anwar Ibrahim, explores policies to attract these private wealth management advisory firms.

The Finance Ministry (MoF) and securities regulator Securities Commission (SC) are actively working to facilitate the establishment of family offices, aiming to drive greater domestic direct investments (DDI) and capital ventures. 

With their expertise in managing and preserving wealth across generations, families or individuals, offering a range of customised services such as investment management, financial planning,
tax and estate planning, and philanthropy. 

The family office market in Malaysia is considered still in its nascent stages and relatively small compared to more established markets such as the US, Europe and Singapore. However, it has been experiencing growth and gaining popularity in recent years. 

The exact size of the family office market in Malaysia is challenging to quantify due to the private and confidential nature of family offices and the lack of comprehensive data available. They are typically discreet and operate with a high degree of privacy, making it difficult to obtain accurate figures on the number and assets under management of family offices in the country. 

However, with the Malaysian government’s initiatives to attract family offices, coupled with the country’s favourable business environment, political stability and robust financial sector, there is potential for the family office market to expand further in Malaysia. 

Singapore’s Experience 

Singapore has seen a sprouting of family offices. The neighbouring republic is now home to about 700 family offices, up from 400 in end-2020 and up seven-fold from 2017, according to government estimates, reported CNA. They are driven by government initiatives, regulatory reforms and the country’s focus on developing its financial industry. 

Malayan Banking Bhd (Maybank) group CEO for global banking Muzaffar Hisham told a Singaporean newspaper that Singapore has attracted substantial wealth over the past few years, making it an appealing destination for families seeking to establish family office structures. 

Aside from assisting wealthy families in Malaysia seeking to set up family office structures here, he was reported to have said that Maybank is “leveraging our network across Asean to bring ideas and investment opportunities from the region to also help clients here grow their wealth”. 

The Global Shift 

The recently released UBS Group AG’s “Global Family Office Report 2023” sheds light on the changing investment landscape for family offices worldwide. 

With the era of low or negative nominal interest rates and abundant liquidity coming to an end, family offices are gearing up for significant shifts in their strategic asset allocations. 

The report reveals their plans to adjust investment portfolios, with an emphasis on diversification, protection, yield and capital appreciation. 

“This year’s report comes at a defining moment in time. It’s the end of an era for low or negative nominal interest rates and the ample liquidity that followed the global financial crisis. Against that backdrop, our research shows that family offices are making major changes to ensure they’re positioned for growth and success,” said UBS head for global family and institutional wealth George Athanasopoulos. 

“While current market and geopolitical trends have prompted a shift to liquid, short-dated fixed income, 66% of family offices still believe that illiquidity boosts returns in the long term and they’re looking to further increase allocations to alternatives like hedge funds, private equity funds and private debt to further diversify their private markets allocations,” he said in the report. 

In response to evolving market conditions, the report said family offices are strategically modifying their asset allocations. 

While allocations to develop market equities remain relatively stable, there is a notable intention to increase investments in emerging market equities, it said. This shift comes as family offices perceive a peak in the US dollar and anticipate China’s reopening to present new opportunities. 

Looking beyond 2023, the report said that family offices anticipate making further adjustments to their strategic asset allocations. 

Developed market fixed-income investments are expected to experience a significant or moderate increase, signalling a reversal of the trend observed over the past three years. 

Risk assets, such as developed market equities and emerging market equities, are expected to receive greater allocations, it said. 

While family offices remain interested in private equity, the report however noted that the level of bullishness appears to be more subdued compared to previous years. 

Nonetheless, a significant proportion (41%) plan to increase direct investments, while 35% are considering investments in funds or funds of funds (an investment vehicle that invests in mutual funds, exchange-traded funds or even hedge funds).

Real estate allocations, although cautious in the short term, are projected to rise over the next five years, indicating optimism in the asset class as interest rates stabilise and valuations become more favourable.

Compared to global peers, family offices in Asia Pacific have the highest allocation to equities (37%), and 46% use hedge funds as a portfolio diversifier. 

Of those with private equity investments, they also make direct investments more than other regions (31%) and 77% of their private equity investments are invested in technology. From an investment theme perspective, medical devices and health technology resonates best (76%). Family offices in Asia Pacific have a home bias, with 51% of assets invested in the region, including Greater China. 

Considering Family Offices in Malaysia

Family offices in Malaysia face considerations and challenges that require careful evaluation and planning. Following the government’s announcement of policies to attract family offices, families contemplating the establishment of such entities should undertake thorough assessments to determine their needs and gauge the long-term viability and benefits of such a structure.

One crucial aspect to consider is Malaysia’s complex regulatory environment, which encompasses various laws and regulations governing financial services, taxation and business operations. Complying with these regulations often necessitates specialised knowledge and expertise, making the process time-consuming and resource intensive. 

In comparison to other global financial centres, Malaysia may have a relatively smaller pool of experienced professionals with expertise in family office operations, wealth management and specialised financial services.

This could present challenges in recruiting and retaining top talent, particularly when specific requirements or demands need to be met by the family office. 

Although Malaysia offers diverse investment opportunities, its market size is smaller compared to some major global economies. This may limit the scale of investment options available, particularly for families seeking significant diversification or exposure to specific sectors or asset classes. 

Operating a family office in Malaysia also exposes families to currency risk, as fluctuations in exchange rates can impact the value of investments and wealth held in different currencies. Consequently, managing currency risk becomes a critical consideration, especially for families with international exposure. 

However, Malaysia’s strategic initiatives and commitment to attracting global talent can help mitigate this challenge, as collaborations with international experts can bridge the gap and offer broader investment perspectives. 

As the country continues to make strides in this direction, it is expected to attract and nurture family offices that will play a crucial role in the growth and success of Malaysia’s private wealth management sector. 


If you find yourself requiring assistance in setting up a family office in Malaysia, please feel free to contact us via WhatsApp: +60 16 - 232 8448.



Popular posts from this blog

Best 6 Retirement Villages in Malaysia 2024

Glutathione vs NAD: What's the Difference?

6 Best Cloud Kitchens in Kuala Lumpur and Selangor 2024

10 Best E Wallets in Malaysia 2024

12 Best SME Business Loans in Malaysia 2024

FLCCC I-Care Early Treatment Protocol (2023)

FLCCC I-Recover Protocol: Post Vaccine Treatment Protocol (2023)

6 Best NMN Supplements To Buy In 2024

Best 7 Executive MBAs in Malaysia 2022

Top 17 SEO Companies in Malaysia: Price and Reviews 2024