Malaysia's family office scheme attracts RM20.8bil

Malaysia's Single Family Office (SFO) Incentive Scheme has seen an indicative RM20.8 billion in assets under management as of end-September, surpassing its initial RM2 billion target by more than 10 times. This surge in interest from local and foreign families, including those repatriating wealth, was reported by Securities Commission Malaysia (SC) executive director Shahrul Amry Abd Malek during the Family Office Summit Malaysia.

The tax incentive is contingent upon families investing, engaging in local spending, and hiring locally, as the aim is to foster locally operating families rather than just registered structures. An SFO is a private entity designed to manage the wealth and investments of a single wealthy family, and the scheme, introduced under the Forest City Special Financial Zone initiative in Johor, offers a zero per cent tax rate for up to 20 years if certain local investment, employment, and spending criteria are met.

These measures are expected to stimulate at least RM200 million in fresh investments to the capital market, benefiting various sectors like banks, fund managers, investment advisers, trustees, lawyers, and tax advisers. SC is introducing more flexibility through the Multi-Family Office (MFO) model, allowing families to hire an SC-licensed fund manager directly instead of establishing a separate management company.

This flexibility will enable families to access professional investment management while retaining control over their investment mandates, with the option to operate through an MFO, SFO, or a combination of both. To ensure adherence to the scheme's requirements, families must apply for certification within 18 months of receiving conditional approval.

Malaysia's appeal as a private capital destination is bolstered by its strategic location in Asean, skilled workforce, common law system, leadership in Islamic finance, and long-term residence pathways. The country's capital market, which grew to RM4.5 trillion, seeks to become a regional hub for companies seeking capital and investors.

Additionally, the country's micro, small, and medium enterprises present substantial investment opportunities for family offices, with a financing gap of RM268 billion. Co-investment platforms like the Malaysia Co-Investment Fund have mobilized RM7.7 billion for over 11,500 businesses, with public funds investing alongside private investors.

Family offices can participate directly or through various investment vehicles, including Shariah-compliant options. The country's partnership with Hong Kong, through a memorandum of understanding with the Securities and Futures Commission, enables dual initial public offerings in both markets using a single submission document, along with mutual recognition of funds, including exchange-traded funds and real estate investment trusts.