The Future of Singapore’s Hedge Fund Industry

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Globalisation is a term often associated with the development of international trade and cross-border transfer of knowledge. One of the key factors that contributes to a significant growth in international trade is the implementation of trade facilitation agreements. Being a highly trade-dependent economy, Singapore has various bilateral and multilateral agreements in force to deepen regional integration and eliminate the trade barriers for better market access. It allows Singapore businesses to achieve economies of scale and improve their efficiencies through work specialisation. In January 2021, Singapore together with other 14 countries have signed a trade agreement, The Regional Comprehensive Economic Partnership (RCEP). According to Singapore’s minister for trade and industry, Mr Gan Kim Yong, RCEP aims to promote greater transparency in terms of the rules and regulations and provide a better assurance to investors within the regions.

Impacts on the Hedge Fund Industry

With the implementation of various initiatives to boost economic integration, Singapore is widely recognised as a business-friendly country with efficient regulatory framework that enables hassle-free investing. As a result, investors are shifting their focus to Singapore and we have seen a remarkable growth in the country’s assets under management in year 2020. For instance, in the hedge fund industry, we can expect large inflow of funds as global investors are shifting their assets from North America and Europe to Asia region. To further elaborate on this, a Credit Suisse Group survey revealed in a survey that more than 200 institutional investors with S$1.09 trillion in hedge fund assets are showing strong interest towards Asia Pacific with a total of 55% net demand. The major players in the Asia region that outperform the others and become the top investment destination of choice are Singapore and Hong Kong.

Conclusion

As a flexible investment option that offers greater portfolio diversification, hedge funds are performing well in the market and continuing to attract global investors despite the Covid-19 recession. According to a data from BarclayHedge, total hedge fund assets hit US$4.07 trillion as of the end of March 2021. In Singapore, hedge fund managers operating with more than 30 qualified investors will have to apply a Capital Markets Services (CMS) licence from the Monetary Authority of Singapore (MAS). For companies that are providing fund advisory services to investors, they will have to apply for a Financial Adviser’s licence in order to conduct the regulated activities.

Find out more on the MAS licensing requirements.

How we can help

Alder offers integrated solutions for clients who wish to set up a fund management company in Singapore which include:

• Offer Professional Advice on the Specific Licence Requirements
• Assist with the CMS Licence Application
• Review the Submission Documents (Form 1A, Form 3A, Form 11, Form 22A whichever applicable)
• Liaise with MAS on Licence Application-related matters
• Provide On-going Compliance Support Post-Licence Approval

Reference Materials

Choudhury, S. R. (2022). ‘World’s largest trade deal is in force, but there’s still ‘work to be done,’ says Singapore minister’, CNBC, 4 January. Available at: https://www.cnbc.com/2022/01/04/rcep-singapore-minister-on-trade-benefits-for-businesses-investors.html

Cox, J. (2021). ‘Hedge fund assets soar to record high amid boom in trading profits’, CNBC, 2 June. Available at: https://www.cnbc.com/2021/06/02/hedge-fund-assets-soar-to-record-high-amid-boom-in-trading-profits.html

Ramli, D. & Hu, B. (2021). ‘Global Hedge Fund Investors with $812 Billion Prefer Asia’, Bloomberg, 22 March. Available at: https://www.bloomberg.com/news/articles/2021-03-21/hedge-fund-investors-with-812-billion-see-asia-as-preferred-bet