Singapore and Hong Kong are stepping up their battle to attract hedge funds and the people who run them, with tax incentives emerging as the latest weapon in the competition between Asia’s two financial centres, according to a report by the Business Times.
The rivalry intensified this week after Singapore unveiled plans to exempt certain performance-related income earned by fund managers and investment professionals, potentially offering tax treatment that could rival or exceed Hong Kong’s recently proposed changes to carried interest.
The announcement has prompted fund managers and advisers to reassess where they and their businesses should be based, according to people familiar with the discussions.
The issue took centre stage at a private gathering of Singapore’s financial leaders on Wednesday evening, where Chee Hong Tat, deputy chairman of the Monetary Authority of Singapore, discussed the city-state’s efforts to strengthen its position as an asset management hub.
The meeting, held at the Sofitel’s Wallich Ballroom and organised by the MAS’s Singapore Financial Leaders Network, followed the government’s announcement earlier that day of new measures designed to make Singapore more attractive to asset managers.
The proposals have generated considerable interest among hedge funds, with fund executives turning to tax advisers to assess the potential benefits and implications.
The latest measures add another dimension to the long-running competition between Singapore and Hong Kong. Each centre is home to an asset management industry valued at more than $5tn, making the location of fund managers, investment teams and their associated businesses economically significant.
Singapore has yet to provide all the details of its proposed tax regime. Chee indicated that further information would be provided in the government’s next annual budget, expected in February.
The prospect of more favourable tax treatment is already influencing decisions among some Singapore-based hedge funds.
Several executives said employees who had been considering moves to Hong Kong were now reassessing those plans. The timing is particularly important for portfolio managers with families, as applications for international schools for the 2027 academic year often close as early as November.
A tax adviser said some clients who had begun restructuring their businesses and preparing to relocate senior investment professionals to Hong Kong were now putting those plans on hold while they waited for more clarity.
However, the final impact will depend heavily on how Singapore defines eligible income and who can claim the exemption.
That is particularly relevant for multi-strategy hedge funds, where individual portfolio managers often operate within separate investment teams or “pods”. Firms such as Millennium Management and Balyasny Asset Management have built their businesses around these structures.
Managers want to know whether Singapore’s proposed exemption will apply to profits generated by individual pods or only to returns at the broader fund level.
Hong Kong’s proposal has generally been interpreted as providing benefits further down the investment chain, potentially reaching individual portfolio managers. Singapore’s framework could ultimately be narrower, depending on how the rules are drafted, according to a tax specialist.
There are also questions over whether investment professionals supporting portfolio managers — including analysts and other specialists — will qualify.
Hong Kong’s proposals initially generated interest among a broad range of employees, although subsequent clarification narrowed the scope of the measures. Proprietary trading firms, for example, were excluded, while the government provided greater detail on which employees could benefit.
Singapore is simultaneously adjusting its immigration framework to make it easier for senior asset management professionals to qualify for the Overseas Networks & Expertise Pass.
Previously, applicants generally needed a monthly base salary of at least SGD30,000. That threshold can be difficult for senior investment professionals because compensation is often heavily weighted towards bonuses and performance-related pay.
Allowing other forms of income to count could make the scheme more relevant to the fund management industry.
The tax changes could also encourage managers to restructure existing arrangements. Fund groups frequently use offshore entities to manage tax liabilities or structure performance-related compensation as capital gains.
