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Hedge Fund Monthly
Singapore reforms for growth
October 2004

Since the mid-nineties, the Singapore Government has identified the investment management industry as one of the key financial sectors to develop. To this end, the Singapore Government, through the Monetary Authority of Singapore ("MAS"), has introduced various incentives and reforms to encourage the growth of the investment management industry.

Some of the key measures taken by the Singapore Government include:

  • introduction of tax incentives which allow qualifying fund management
    companies to enjoy tax exemption or concessionary tax rates for the fee income earned from providing investment management or advisory services. In addition, unit trusts and approved trustee companies are also offered concessionary tax rates;

  • relaxation of the minimum shareholders' fund requirement for an Investment Adviser's licence from S$500 million to S$100 million. The minimum amount of global funds that the company must manage was also lowered from S$5 billion to S$1 billion. In addition, the MAS introduced a streamlined licensing scheme aimed at admitting more boutique fund management firms to add greater depth to the fund management industry;

  • introduction of a new regulatory framework to streamline and enhance the supervision of the capital markets and financial advisory industries;

  • allowing external fund managers to manage a portion of the government funds and encouraging statutory boards and government-linked companies to place out their excess funds to external fund managers;

  • revamping of the Central Provident Fund ("CPF") Investment Scheme to increase the number of quality asset managers and products available to CPF members.

The measures taken by the Government of Singapore have been successful. As at 31 December 2002, total reported assets managed by Singapore-based financial institutions in Singapore amounted to S$343.8 billion, as compared to only S$65.9 billion in 1994.

The graph below illustrates the growth of the asset management industry in Singapore over the years.

Click here to view larger image

In addition, in comparison to Hong Kong - Singapore's close rival within the Asia-Pacific region as fund management centres - the Singapore Government incentives schemes seems to have encouraged more financial institutions to set up their operations in Singapore as compared to Hong Kong. This can be illustrated by the rate of growth in asset under management as shown in the table below.

Click here to view larger image

Although, Hong Kong is a larger fund management centre based on the numbers, Singapore has been growing steadily over the years. This can be attributed to the Singapore Government strategy to stimulate the growth of the industry through a range of incentives as opposed to Hong Kong which appears to be largely market driven. In both countries, however, the regulators have been active to provide a regulatory framework for the industry to expand further. With the relaxation and streamlining of the licensing requirement, there are at present 92 licensed fund management
companies in Singapore. In addition to this, there are also a large number of exempt fund managers who provide services to only high-net worth individuals and institutions.

Unit trusts have shown an even greater rate of growth, from S$1.2 billion at the end of 1994 to S$14.1 billion at the end of December 2002. There are now more than 380 locally domiciled unit trusts (including sub-funds within each umbrella fund) being offered for sale to the general public in Singapore. Since the announcement of further liberalisation in unit trusts sales in 2002 (i.e. allowing the offer of fund domiciled in an offshore jurisdiction to the general public in Singapore), more than 50 foreign-domiciled collective investment schemes have been registered for sale to the Singapore retail market in 2003.

Currently, the Government of Singapore and the MAS are stepping up their efforts in attracting hedge fund managers to set up operations in Singapore through further liberalisation and incentives as well as providing a conducive business environment for fund managers.

The Government of Singapore is committed to positioning Singapore as a major investment management centre in Asia for Asian (ex-Japan) mandates of global funds and the global mandates of Asian clients.

Quek Bin Hwee: Singapore
Tel : (65) 6236 3028
Email: bin.hwee.quek@sg.pwcglobal.com

John Kwai: Singapore
Tel : (65) 6236 3022
Email: john.kwai@sg.pwcglobal.com


If you have any comments about or contributions to make to this newsletter, please email advisor@eurekahedge.com

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