Family offices are increasingly being discussed as an investment opportunity in Indonesia. Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan first raised this discourse on the sidelines of the World Water Forum in Bali in May 2024.
Family Office Plans in Indonesia
At that time, Luhut Binsar Pandjaitan proposed establishing a family office so that rich people from abroad would want to invest in Indonesia.
He also said several countries in several countries, such as Singapore, Hong Kong, and Abu Dhabi. In fact, Singapore already has 1,500 family offices.
Therefore, the country can be a reference for Indonesia in establishing a family office. Luhut believes in Indonesia’s potential, stating that if Singapore can do it, then Indonesia must also be able to, inspiring a sense of motivation and possibility in the audience.
“If they can make it, why can’t we? It will benefit the Republic (of Indonesia),” Luhut said.
The family office will be located in Bali and IKN
The government took this proposal seriously. It even seems to have been proposed in a meeting with the president.
“In the meeting, it was discussed … we have options in Bali, there are two SEZs (Special Economic Zones), namely Kura-kura Bali and Sanur, then also in IKN it is also an option,” Luhut said in a video uploaded to his Instagram account on Tuesday, June 27, 2024.
Luhut said that he also received an order to form a task force to review the establishment of the family office. He expects the task force to be able to work as soon as possible and provide solutions related to the formation of the family office as quickly as possible.
According to Minister of Tourism and Creative Economy Sandiaga Uno, many family office communities worldwide are eyeing investment in Bali. The government also offers the opportunity to invest in the Capital City of the Archipelago (IKN) in East Kalimantan.
According to Sandiaga, there are already regulations in IKN that launch the application of Family Office in the region.
Sandiaga said Indonesia has the potential to attract US$500 billion, or around Rp8,178.8 trillion (assuming an exchange rate of Rp16,357 per US dollar), from forming a family office that manages the wealth of the super
rich. That amount is only 5 percent of the financial management of family offices globally, reaching US $11.7 trillion.
What is a family office?
Family offices are institutions that manage the wealth of super-rich family’s assets with a highly personalized and comprehensive approach.
Today, there are two main types of family offices: Single Family Offices (SFO) and Multi-Family Offices (MFO). Each type has different characteristics and functions according to the needs of the families served.
Single Family Office (SFO) serves only one family and is usually established to manage vast family wealth. According to Data Indonesia, SFOs serve the financial and investment needs of one family. The advantage of an SFO lies in its deep focus and highly personalized services, allowing for more effective and efficient management according to the family’s goals and preferences.
In contrast, a Multi-Family Office (MFO) caters to multiple families who have similar wealth management needs. MFOs allow families to share operating costs and access professional services that may be too expensive to utilize individually. MFOs are more cost-effective as they allow multiple families to share resources and services.
MFOs often offer various services, including investment management, tax planning, and legal consulting.
Taking care of the rich’s investments
Family offices are private companies that manage wealthy families’ investment and wealth management.
Outside of Indonesia, these families generally have at least US$50 million-US$100 million or equivalent to IDR 800 million-IDR 1 trillion of investable assets intending to effectively grow and transfer wealth from one generation to the next.
The financial capital of a family office is the family’s own wealth.
In some countries that have implemented family offices, the standard wealthy family has at least US$50 million-US$100 million or equivalent to Rp800 million-Rp1 trillion of investable assets.
These assets are invested to develop and transfer wealth effectively from one generation to the next.
