Taiwan has an opportunity to attract more of these investments.
Well over a century ago, the Rockefellers pioneered the idea of establishing a professionally staffed “family office” to manage private investments on behalf of members of the family. Since then, many ultra-wealthy family groups have followed suit.
In recent years, according to an article in Forbes this August, the family-office structure has seen a rapid rise in popularity as the super-rich seek out the most efficient ways to handle their assets. Given the dramatic increase over the past decade in the amount of wealth that family offices manage, these offices are now able to engage in transactions of a scale previously reserved for private equity and other larger firms.
In AmCham Taipei’s 2019 Taiwan White Paper, the Private Equity Committee called the attention of the Taiwan financial authorities to this trend. “Many traditional hedge fund operators have closed their funds in order to open family-office types of investment vehicles,” the Committee noted. “Given Asia’s ability to attract capital from around the world, some of these family offices are moving into the region, most often to Singapore and Hong Kong. Taiwan, with its large number of family-owned enterprises is also seeing a similar trend domestically as well-to-do families open offices to manage their wealth and make investments.”
Unfortunately, however, the legal and regulatory environment in Taiwan has not been as conducive as it could be for investments from high-net-worth families. Industry sources cite the high taxes on investment returns as a major disincentive. Another is a rather inflexible regulatory system that fails to account for the broad range of functions that a family office typically provides. Besides simply offering investment advice and financial services, such offices often also deal with legal issues, tax advice, and estate and succession planning.
Generally speaking, the investment philosophy of family offices differs from that of hedge funds and many other institutional investors in that they tend to invest for the long-term, and they increasingly prefer investments that have some environmental or social impact. As a result, experts believe that their involvement in the Taiwan economy would be particularly beneficial at a time when this country needs sustained capital to build up such strategic industries as biomedicine, green energy, and artificial intelligence.
In its White Paper submission, the Private Equity Committee urges Taiwan’s regulators to develop an environment that will attract international family-office funds to invest in Taiwan, as well as assist Taiwanese family offices to operate more effectively.