"There are many rich people in Korea. But for asset holders to properly run a family office (Family Office, FO), the current investment culture and regulatory environment are far from sufficient. Tax reform, financial education, and an overhaul of the overall market structure must proceed in tandem."
Corporate head Kwon Ki-jung of NH Absolute Return Partners (NH ARP) defined the essence of a family office as "a long-term strategy tailored to the asset holder's standards" and emphasized this point. NH ARP, the Singapore subsidiary of NH Investment & Securities, is an alternative asset specialist manager.
Since 2009, Kwon has worked on the front lines of finance in Singapore, joining NH in 2020 after stints at a U.K. investment bank (IB), among others. Having long worked closely with global investors such as hedge funds and family offices, Kwon is regarded as a local expert who has a firm grasp of the flow of Singapore's capital markets.
Kwon said, "In Korea, many people who reach a certain level of assets use private banking (PB) services, but once assets exceed 100 billion won, plain PB is not enough," adding, "You need to move to the family office stage, which requires strategic asset allocation and risk management."
Currently, domestic asset holders tend to rely on 'FO services' offered by banks or securities firms rather than setting up their own family offices. On this, Kwon said, "The essence of a family office is for the asset holder to establish a separate legal entity, transfer assets, and operate independently," adding, "Korea still remains at a PB-centered wealth management level, and looking at the market as a whole, it is only in its infancy."
Institutional gaps are also a stumbling block. Korea currently has no separate regulations defining family offices, and they are operated by borrowing the structures of general investment corporations or consulting firms. Family office services run by financial companies are also provided in disparate ways according to each firm's internal standards without institutional guidelines.
The origin of domestic family offices is considered to be Atinum Partners, established by Chairperson Lee Min-joo after selling the cable TV operator C&M in 2008. The purpose was to systematically manage the sale proceeds, which amounted to 1.5 trillion won at the time. However, nearly 20 years on, new cases following Atinum have been extremely rare.
The biggest barrier is the punitive tax structure. Under the current domestic framework, running a family office results in double taxation—corporate tax on asset management revenue and dividend income tax—thus increasing the tax burden. There is little incentive for an asset holder to spend enormous expense to set up a family office directly.
Kwon said improvements are needed to bring family offices with assets above a certain scale into the institutional fold, refine the qualified investor system, and provide tax incentives. If such policy support proceeds in tandem, family offices can contribute to qualitative growth across the financial industry beyond serving as a simple wealth management tool.
Kwon said, "As more family offices emerge, asset managers and securities firms will roll out higher-quality financial products in response, and the number of high-quality financial products can ultimately increase."
As an asset manager, NH ARP focuses on alternative investments centered on private equity and private debt. By the nature of these investments, it has many touchpoints with various family offices.
Having observed countless asset holders up close, Kwon pointed to "financial IQ" as the key factor determining the success or failure of family office investing. Kwon said, "In Singapore, asset holders have a very high understanding of the structure and risks of various investment products," adding, "For example, when we introduce a private debt fund that lends to U.S. small and midsize companies, Singaporean asset holders often look first at default rates and sector risk rather than returns, whereas most Korean asset holders focus on returns."
Kwon also said the short-term performance-oriented investment tendency needs improvement. "The Korean market is still fixated on short-term products," Kwon recalled. "In the past, when I tried to introduce a U.S. fund with an 11-year maturity to the domestic market, I was surprised that the market saw three years as the limit." He warned, "An investment approach obsessed only with short-term performance becomes a fatal risk that can wipe out the entire asset base when a downturn hits."
Kwon also noted that financial companies need to make efforts to screen for good financial products.
Kwon said, "The product lineup available to high-net-worth asset holders and family offices in Korea and Singapore is different," adding, "Of course, large institutions such as Korea's pension funds can access good investment products, but ordinary financial companies often lack experience with overseas products, so related products frequently get blocked at the internal approval stage."
Finally, Kwon reiterated that family offices will become a key pillar leading to a structural upgrade of Korea's financial industry. Kwon said, "The more discerning family offices there are, the more financial companies will supply products with commensurate responsibility and expertise," adding, "This can lead to advances across the financial sector, including wealth management (WM) and PB."