Singapore continues to make significant efforts to further promote the appeal of the Lion City to hedge funds, private equity and other alternative investment managers, and it seems that its strategy is working. In 2020, Singapore’s asset management industry grew strongly, with assets under management (AuM) rising more than 17 per cent overall and at 31 per cent year-on-year in the alternatives sector. Venture capital and private equity continue to be strong performers within this segment.
Singapore continues to make significant efforts to further promote the appeal of the Lion City to hedge funds, private equity and other alternative investment managers, and it seems that its strategy is working. In 2020, Singapore’s asset management industry grew strongly, with assets under management (AuM) rising more than 17 per cent overall and at 31 per cent year-on-year in the alternatives sector. Venture capital and private equity continue to be strong performers within this segment.
Singapore provides a key gateway for global investment managers seeking to raise assets and invest across Asia Pacific’s financial markets and with a significant family office presence, Singapore also represents an important fundraising hub for those seeking to expand in the region.
A game-changing structure
Last year, the unveiling of the Variable Capital Companies (VCC) Act was widely seen in the investment industry as a potential game-changer. In addition to facilitating increasingly attractive and efficient structures for Asia-centric hedge fund strategies and other regional and global alternative investment strategies, the new investment fund framework is expected to have major employment benefits for Singapore’s financial services sector and beyond.
The VCC provides the fund management industry with a new corporate structure tailored for investment funds, offering them greater operational flexibility and cost savings. “Fund managers using the VCC framework benefit from its flexible capital structure, effective segregation of assets and liabilities, and ability to cater to open and close-ended funds,” says Gillian Tan, Assistant Managing Director (Development & International), Monetary Authority of Singapore (MAS).
Some fund managers have even redomiciled their existing funds to Singapore, including from Cayman Islands, Bahamas, Mauritius and Cook Islands. “This demonstrates the global appeal of VCC to fund managers who seek to enhance the substance of their activities locally, and to maximise operational efficiencies and cost savings from co-locating their fund management and fund domiciliation activities in Singapore,” Tan adds.
The VCC’s successful launch has been a catalyst for growth, but also shows the need for sustainable digital capabilities and regulatory developments to grow Singapore as a digital asset hub. Martin O’Regan, Managing Director at Solas, says: “The growing sophistication of funds will require directors to demonstrate skills in risk, strategy oversight, compliance and investment processes.”
A new asset management ecosystem
While the VCC has been a key development, it is not the only one. To underscore how the island views its position within the global funds industry, its financial regulator, MAS, recently announced a new partnership between it and the private sector to burnish Singapore’s reputation as a leading full-service asset management and fund domiciliation hub.
Known as the Singapore Funds Industry Group (SFIG), its mission is to bring together key players across the entire asset management value chain, including not just fund managers but also lawyers, tax advisors, fund administrators and corporate directors. These service providers work closely with fund managers to support a fund’s operations throughout its life cycle in areas such as fund structuring and set-up, fund administration, regulatory reporting, tax advisory, and fiduciary oversight.
Tan comments: “We encourage the fund management and administration industry to tap on SFIG to help ideate, test and implement as it works on digital utilities and infrastructure, provide feedback and insights on regulatory, legal and tax frameworks conducive to Singapore’s development as a funds hub, and contribute content and attend its training and engagement sessions.”
Singapore in the green lane
With the UN’s COP26 summit approaching, Singapore is positioning itself to play a key role as the financial services hub in Asia. Ashmita Chhabra, Managing Director at Apex Group, comments: “Pressure is mounting on the financial sector, not least from the regulators.”
MAS has released a sustainability report to prompt development of a green financial ecosystem and is fostering the development of a green bond market, with its Sustainable Bond Grant Scheme encouraging the issuance of ESG-compliant bonds in Singapore.
Further, a Green Industry Taskforce has been convened, proposing a taxonomy and launching an ERM handbook among other measures to promote ESG considerations in the Singapore markets, while MAS is looking to set out its expectations on disclosure standards that must be met by retail funds in Singapore early in 2022.
Armin P. Choksey, Partner, Asian Investment Fund Centre Leader at PwC Singapore, says: “The road to developing a global ESG standard has still some time to go but the journey has already begun with one initiative at a time.”
Secondary market grows in APac
Meanwhile, despite relatively small numbers of five to 10 per cent of global volume, the Singapore secondaries market continues to grow as such transactions become more ‘mainstream’, and there is cause for further optimism.
Tom Lin, Partner, and Morgan Shubin, Senior Associate at Clifford Chance, comment: “Our view is that, with the benefit of deal trends and sentiment from global transactions, the Singapore ecosystem is particularly well set up to support significant growth of the secondary strategy.”
A vision of the future
It feels like exciting times lie ahead for the Lion City, both for fund managers and service providers alike. Imagining how the industry will develop from 2021-2035, Mark Voumard, Founder and CEO at Gordian Capital, predicts a global economic shift to Asia; strong growth as an asset management and fund domiciliation hub; and the introduction of its own digital currency.
This report will shine a light for all those looking to get a better understanding of Singapore’s virtues, its myriad benefits and why it is fast becoming the ‘go to’ option for Asia Pacific expansion.
