By Mark Voumard – The genesis of Singapore’s asset management industry development: 2021 – 2035
By Mark Voumard – The genesis of Singapore’s asset management industry development: 2021 – 2035
It’s 2035 and Jane Lee, a resort hotel executive in Singapore is planning to invest in one hedge fund and two mutual funds, all Variable Capital Company’s (VCC) managed by asset managers based in Singapore, Asia’s largest asset management centre, fund domiciliation hub and private banking nexus. Her AI digital PA navigates to her personal, cloud based, financial portal reviewing the latest return data and scans her personal, long term financial plan and goals, leading to approval, and Jane is ready to invest. Her AI program using U-Reg, an advanced KYC/AML software, locks into each manager’s online application and completes each subscription form in 30 seconds, supplying certified true copies with a digital watermark of her passport, proof of address and proof of Accredited Investor status. Each fund manager’s AI system checks and verifies all the information resulting in approval within five minutes, with Jane’s AI PA remitting funds in Singapore’s digital currency, the SG-ED.
Global economic shift to Asia
In 2021, a Regional Comprehensive Economic Partnership (RCEP) pact (and the world’s largest free trade agreement) was signed, focusing on reducing trade barriers in Asia. By 2030, it was adding USD220 billion a year to world incomes and USD560 billion to world trade. In 2031, China surpassed the US as the world’s largest economy and by 2033, 42 per cent of world GDP and 36 per cent of global consumer spending was generated in Asia.
The period 2022 to 2029, saw technological innovation and the rapid adoption of technology by governments in Asia; in particular, in Singapore, where the city state ramped up subsidies and multiyear training of the local workforce, to truly transform itself into a knowledge economy. The adoption of digital tools and processes boosted productivity growth and unleashed a wave of innovations across many domestic sectors including finance and asset management.
Strong growth as an asset management and fund domiciliation hub
By 2035, global Assets Under Management (AuM) grew from USD89 trillion in 2021 to USD240 trillion (CAGR 6.84 per cent). By 2035, AuM across the asset management industry in Singapore rose from USD3.5 trillion to USD20 trillion (CAGR 14.34 per cent), second globally as a fund hub, only to Luxembourg’s USD22 trillion (CAGR 11.27 per cent), followed by Shanghai with USD15 trillion. Whilst investment vehicles established and operated in Luxembourg and Singapore are used to make regional (pan-EU and pan-Asian) investments respectively, in the case of Shanghai, most of the capital and assets are domestic, not cross border. In the region, both Australia and Japan have built large pools of domestic capital in domestic vehicles but with a focus still on primarily investing in domestic assets.
Singapore’s growth spurt began in the early 2020s with the launch of the VCC in January 2020. Singapore was already one of the leading asset management and private wealth centres in Asia experiencing double digit CAGR in AuM when it launched the VCC to bring funds onshore where they could be serviced locally and to win a percentage of the global fund domiciliation business.
Prior to the VCC launch, 85 per cent of the money managed from Singapore was in Cayman structures and 4 per cent in Luxembourg structures. 500 VCCs were launched in the first two years (during the first Covid pandemic) and as of August 2035 there are 7,000 VCCs with 70 per cent of the money managed from Singapore now in Singapore domiciled structures. Globally, the trend to onshoring continued through the 2020s, boosted in part by the rollout of the global minimum tax in 2023 that was extended to the financial industry, hitherto exempt, in 2028. Whilst some US-based managers continue to use Cayman and increasingly Delaware vehicles, the rest of the world, over time, shifted to either Luxembourg, despite the partial break-up of the EU in 2027, for European investments or Singapore for Asian investments.
Between 2021 and 2035, Singapore’s share as a percentage of global AuM increased from 3 per cent to approximately 9 per cent and the number of licensed asset managers based in Singapore increased from 1,050 to 2,950. By 2028, the Asian Regional Fund Passport (ARFP), a cross-border, online system allowing residents of 15 countries across Asia to access funds domiciled and or managed in each of the other 14 countries, had overcome prior obstacles and was in full swing. By 2029, Asia accounted for 75 per cent of all the venture finance in the world versus 3 per cent in 2005. With a focus on political stability, the rule of law and the strongest IP rights in Asia, Singapore became the regional headquarters for many of the Asian recipients of this wave of money.
Use of AI by hedge funds
XAI or Explainable Artificial Intelligence (a term created by DARPA) allows humans to understand how and why AI generates a specific set of results and allows managers to be able to explain to investors exactly how alpha is being generated. Singapore bet the house on this technology providing significant government funding for hedge funds utilising XAI, leading to Singapore becoming a world-leading XAI hub.
Introduction of digital currency
The MAS issued its own digital currency, the SG-ED in 2025, which further cemented Singapore’s position as a centre for crypto and blockchain investing and trading. That said, as more and more central banks issued their own digital currencies (CBDCs) with China leading the charge in 2022 issuing an ‘e-yuan’ and the US belatedly issuing its own USD-ED in 2028, the growth of independent crypto currencies such as Bitcoin fell dramatically. The use of the SG-ED prompted previously unbanked assets from across Asia to shift into its rigorous financial system and improved speed, cost, and transparency of cross-border payments.
The talent bottleneck
The knowledge economy created tremendous demand for skilled workers with the numbers in the financial industry jumping to 700,000 in 2034 from 200,000 in 2014 and the finance industry contributed to 48 per cent of Singapore’s GDP in 2034 versus 19 per cent in 2021. The path was not easy with a talent bottleneck developing in the asset management industry between 2020 and 2022. A subsequent significant increase in the number of global asset managers basing themselves in Singapore, bringing with them international expertise, beneficial for knowledge transfer and upskilling of the local workforce, combined with strong support by the MAS for academic programs and training provided by the industry, resulted in a significant expansion of financially trained workers.
Mark Voumard
Founder and CEO of Gordian Capital
Executive Committee Member and Co-Chair of the Promotion and Advocacy Working Group, Singapore Funds Industry Group (SFIG). Mark Voumard, who has almost four decades of experience in Asia, is founder and CEO of Gordian Capital, Asia’s leading independent alternatives institutional platform and fund structuring specialist (AUM USD7 billion) where since 2005, he has been involved in the structuring and launch of over 100 funds (hedge, private equity, venture capital, real estate, and private credit).
