Opening Remarks by Mr Ng Nam Sin, Executive Director, Financial Centre Development Department, Monetary Authority of Singapore, at Fund of Funds World, Grand Hyatt, Singapore on 18 May 2004
1 Good morning. I am pleased to be here at the Fund of Funds World Asia 2004. It is encouraging to see so many of Asia's hedge funds managers converging in Singapore for this event. The global hedge fund industry is growing at a phenomenal pace. Singapore has benefited from this growth. I would like, today, to share with you recent developments in the hedge funds industry, as well as the broader asset management industry in Singapore. I will also highlight some of our recent initiatives to encourage further growth in this sector.
2 The global hedge funds industry has come a long way. Today, global hedge funds AUM is estimated at more than US$1 trillion1, compared with US$700bn just a year ago.
3 Various trends support the growth of the hedge funds industry:
- First - growth in the private banking market and the increasing sophistication of High Net Worth Individuals. They are pursuing more complex investment strategies to maximize returns. Such instruments account for an increasingly larger part of their portfolios.
- Second - Institutional investors have become more familiar with hedge funds, thus making it a more acceptable allocation in their portfolio mix. For instance, the appetite for hedge funds investment by pension funds has increased substantially.
- Third - retail demand. Hedge funds are no longer the exclusive preserve of High Net Worth Individuals. The growth of fund of hedge funds facilitates retail access to this category of investments.
- Finally, from the supply side, we are seeing talented fund managers leaving financial institutions to start their own hedge funds. Many established fund management houses have also been diversifying into hedge funds to offer the full suite of products.
Hedge Funds and the Asset Management Industry in Singapore
4 In Singapore, hedge funds is becoming a significant part of the asset management industry. Asset management is an activity that the Singapore Government has actively encouraged since the 1980s.
5 In the past five years, our asset management industry has registered strong growth. In 2002, assets under management (AUM) grew 12% year-on-year despite difficult global market conditions. This year, prelim estimates point to even higher growth. As Asian economies rebound, we envisage continuing strong investor interest in the region, with positive spillover benefits to Singapore.
6 In the area of hedge funds, we are seeing significant growth. There are currently more than 50 hedge fund players, ranging from boutiques to established global names. More than 10 alone were set up since the beginning of this year. Our sources indicate that total hedge fund AUM in Singapore exceeds US$2.5bn.
7 Potential for growth is encouraging. Firstly, Asian strategy hedge funds have grown significantly due to greater investor interest from the US and Europe. It is estimated that hedge fund assets in Asia have tripled over the past 3 years. Investors see Asia as an increasingly attractive location and Singapore is riding on the wave of increased interest. Secondly, growth can be attributed to the availability of HNWI wealth in Asia. This sizeable pool of funds attracts a wide variety of hedge fund players.
8 Going forward, MAS will continue to work on improving the operating environment for hedge fund managers and investors.
9 Singapore has a very conducive tax framework. There is clarity and certainty of tax status for non-resident funds managed by Singapore based fund managers. At the same time, we have modified the tax incentive schemes to allow more players, including hedge fund players to enjoy concessionary tax treatment2.
10 In regulation, the MAS has moved away from a rigid one-size-fits-all regulation to a more flexible, risk-based supervisory approach. We are currently fine-tuning the requirements under the Boutique Fund Manager licence to take into consideration the unique setup of hedge funds. We have revised our guidelines to lower the minimum subscription level for single strategy hedge funds to S$100,000 per investor and S$20,000 for fund of hedge funds.
11 In addition, the Trustees Act is currently under review and changes will be implemented by year-end. These changes will help also to improve flexibility in the investment environment.
12 In tandem with this, MAS will also be working with industry associations to facilitate investor education, both on the institutional and retail fronts. The proliferation of new investment products has added to the complexity of investing. It is thus critical to equip investors with a better understanding of such products.
13 We have put in place fundamental building blocks for a successful asset management industry. However, it is also important to have close dialog and interactions among industry players. This will help to address both issues and opportunities, as well as provide useful feedback to regulators and governments. In this respect, conferences like this goes a long way to fulfilling this objective.
14 With this, may I wish you fruitful deliberations today. Thank you.
1 Alternative Fund Services Review Bi-Annual Hedge Fund Administrator Survey
2 Previous criteria for Approved Fund Manager status include minimum AUM of S$100m, at least 2 investment professionals and commitment to a growth plan over 5 years. Under FSI, the only criteria needed to qualify for the ST award for fund management and investment advisory services is the employment of at least 3 professional staff.