Singapore’s USD53billion hedge fund industry could be under threat of shrinking on the back of new regulations that are expected to raise costs for small h
Singapore’s USD53billion hedge fund industry could be under threat of shrinking on the back of new regulations that are expected to raise costs for small hedge funds reported Reuters this week. The Lion City’s regulations are widely applauded for their pragmatism and in light of the heavy regulatory upheavals in Europe and the US has attracted numerous global heavyweights like Fortress Investment Group. Under the new regulation, which will be implemented in early 2012, fund managers with less than SGD250million in assets and fewer than 30 qualified investors will be able to apply for Exempt Fund Manager status by writing to the Monetary Authority of Singapore but will still be required to register with the state’s industry regulator. Those running more than SGD250million will need to be licensed. This is, in the grand scheme of things, a sensible regime and less prescriptive than Hong Kong where all managers, regardless of size, have to be licensed with the SFC. One thing is certain, though: the costs to start-ups will be higher. Many of the city’s smaller funds will be required to merge, close or turn themselves into family offices to avoid being regulated, some experts say.
MAS says the new regulation will “achieve long-term sustainability of the fund management industry”. Peter Douglas, principal of GFIA Pte, a hedge fund consultancy firm, said that in the near-term as much as 15 per cent of the roughly 400 hedge funds in Singapore might decide to shutter. Operating costs are rising in the city says Reuters, office rents having gone up by 38 per cent since 2009 according to CBRE. Extra demands on reporting and compliance and the fact that all funds will have to be independently audited could add tens of thousands of dollars in costs. Not a problem for fund managers with USD100million+ in assets but for those running a tight operation this might prove too onerous.
