Interview with Yang Eu Jin & Tan Choon Leng – “In Singapore most fund management start-ups will require some form of registration with MAS, it’s just a question of what form of registration or licensing they’ll need based on what they intend to do,” explains Yang Eu Jin (pictured), Partner, Corporate & Securities Laws, KhattarWong, one of Singapore’s largest indigenous law firms.
Eighteen months ago, Yang says there was some “regulatory uncertainty”. Industry players heard news there was going to be a revamp of the fund management licensing regime but what that entailed was not clear. This, he says, may have led to some start-ups “putting their plans on hold” or looking for other jurisdictions to domicile. When MAS released its consultation paper last April, however, it gave a good idea what those changes would be and that restored confidence in the market.
In another proactive move following the ’08 financial crisis, MAS embarked on an auditing blitz of all exempt fund managers, prompting anxious calls from managers “who were concerned that they may be found wanting in some ways,” says Yang.
The new licensing provisions by MAS have brought regulatory clarity to the city-state. This has raised the quality of hedge funds says Tan Choon Leng, another partner at KhattarWong: “In the past it was probably easier to get MAS exemption. The guys that might have been profitable but badly governed have been weeded out. What you have now is a new breed of managers who have stepped up their game,” comments Tan.
This has helped KhattarWong’s advisory business grow. Start-up numbers, although having suffered a blip in 2009, have been building momentum since ’05. Both partners agree that last year probably saw a 30 per cent increase in business but Yang says that, taken over a longer trajectory of 5 years, growth has been exponential.
Singapore’s pragmatic approach to regulation has long had overseas admirers. With Dodd-Frank and AIFMD hanging like a storm cloud, western fund managers are making a beeline there. “We probably have a lot of AUM with prop trader spin-offs, that’s one of the reasons we’ve seen our business increase. But the sheer number isn’t that great,” explains Tan.
“Investment opportunities in Asia and the growing number of potential HNW investors are two other important factors,” adds Yang. “This combination is causing people to move out here and set up shop.”
Client sentiment regarding the new MAS provisions is mixed according to Yang. He says that some were concerned they’d breach the AUM cap of SGD250million, whilst a few were concerned about the paid-up capital requirements of SGD250,000. “SGD250,000 is usually not a princely sum for hedge fund managers so most don’t have an issue with that. The general sentiment is that it’s better to have clarity than none at all,” comments Yang.
Being one of the strongest regional practices in Asia, KhattarWong is well placed to capitalise on the expected increase in hedge fund start-ups in Singapore. It has one of the city’s leading China practices, offering clients Pan-Asia advisory support. “We have offices in Vietnam, Hong Kong, and an operations base in Shanghai but we also have lawyers here that come from China and Southeast Asia as well,” explains Tan.
Whilst regulatory uncertainty remains in the US and Europe, Yang believes talent and capital will continue to move to Asia: “Clarity in this industry is so important.” “Even though prices and valuations have gone up,” says Tan, “the mid-term outlook is that Asia is on a strong growth trajectory and we hope to grow with it.”