Published Date: 26 March 2015

"Looking Back, Looking Forward" - Opening Address by Mrs Josephine Teo, Senior Minister of State for Finance and Transport, at the Investment Management Association of Singapore (IMAS) 16th Annual Conference on 26 March 2015

Mr Nicholas Hadow, Chairman of IMAS

Distinguished Guests

Ladies and Gentlemen

Good morning and thank you for inviting me to join you at the IMAS 16th Annual Conference.


2   Given today’s conference theme, “Looking Back, Looking Forward”, it seems fitting for us to have observed a minute of silence earlier in memory of the late Mr Lee Kuan Yew. At the same time, it seems appropriate to also take a moment to reflect on the foundations of our asset management industry, and indeed Singapore’s development as a financial centre.

3   In his memoirs “From Third World to First”, Mr Lee described the events leading to Singapore’s initial forays into the world of global finance and its subsequent liberalisation.  As Prime Minister then, he recognised that “In 1968, Singapore was a third world country. Foreign bankers needed to be sure of stable social conditions, a good working and living environment, efficient infrastructure and a pool of skilled and adaptable professionals”.

4   Under Mr Lee’s leadership, Singapore has come to be known worldwide for all these qualities. In Mr Lee’s own words, “The history of our financial centre is the story of how we built up credibility as a place of integrity…”

5   With a limited domestic market, Mr Lee emphasised the need for Singapore to stay relevant to the world and to “ride the surf” as the world changes.  He systematically built up a business environment characterised by openness to trade, investment and talent.  This was and remains a key strength for Singapore as a financial centre, which the Government fully intends to build on.

6   When the first IMAS conference was held in 1998, the region was in fact, in the trough of a deep financial crisis. Yet, Singapore remained confident of industry’s long-term prospects and pushed ahead with our development strategies.

7   We were thus well positioned to ride the recovery when it came about. Between 1998 and 2013, the industry made great strides, with assets under management (AUM) growing from $150 billion to over $1.8 trillion.

8   Recent trends give us reason to be optimistic. AUM continues to register strong growth, averaging about 10% per annum from 2010 to 2013. More importantly, Singapore continues to consolidate its position as a pan-Asia asset management centre. For example:

(i) Over three-quarters (77%) of industry AUM in 2013 was sourced from outside Singapore; and

(ii) Close to two-thirds (67%) of it was invested in the Asia Pacific region.

9   The diverse ecosystem here, comprising of internationally active asset managers, banks and insurance companies, fixed income and foreign exchange participants, reinforce Singapore’s strong global and regional links.

10   In addition to its regional role, the investment management industry also serves a growing Singapore market, including both institutional and individual investors. Let me say more about the latter group, the individual investors, specifically on proposals to improve savings and investment options for them.  


11   The investment management industry plays an important role in helping individual investors achieve their financial objectives by offering a spectrum of investment products with different risk-return characteristics to meet varied needs. These products can be further differentiated by a range of liquidity and maturity profiles.

12   As Singapore’s population matures and life expectancy has extended, investing to achieve retirement objectives has taken on greater significance.

13   Most Singaporeans today put their money in bank deposits that offer lower but predictable returns with little risk.  Alternatively, they may invest in equities or property in the hope of higher returns, but these investments also carry significantly higher risks. For the purpose of retirement planning, it will benefit Singaporeans to have easier access to asset classes such as fixed income products and low-cost diversified investment products, which provide an intermediate level of risk and return.

14   Having a broader range of simple and low-cost investment options will complement our CPF system and the additional measures that the Government recently announced to strengthen retirement adequacy, such as the higher CPF contribution rates and salary ceiling, enhanced interest rates on the CPF balances of older Singaporeans, and a new Silver Support Scheme.

15   Therefore, the Government, through MAS, is introducing three broad initiatives to expand the range of simple, low-cost investment options available to individual investors. These are:

(i) Improving the availability of corporate bonds to retail investors;
(ii) Enhancing retail access to Exchange Traded Funds; and
(iii) Introducing a new Singapore Savings Bonds for local investors.


16   Let me start with corporate bonds. Plain vanilla corporate bonds can be an attractive investment option for investors as they are relatively easy to understand, offer stable returns that are typically higher than fixed deposit rates and are less susceptible to extreme price movements. 

17   However, availability of corporate bonds to retail investors has been slow to take off, due primarily to two factors:

(i) Strong demand for quality corporate issuances from institutional and accredited investors – banks, financial institutions, asset managers and high net-worth individuals – reduces the need for corporates to tap the retail market for funds.
(ii) Corporate issuers have to meet certain disclosure requirements, such as publication of a prospectus, to sell bonds to retail investors. While these disclosure requirements are designed to enhance investor protection by ensuring essential information are communicated to them, they also require longer preparation time and result in higher costs for the corporate issuer, which may therefore prefer to focus on institutional and accredited investors.

18   To make plain vanilla corporate bonds more readily available to Singapore retail investors, the MAS and SGX will ease the financial and administrative costs for issuers seeking to tap the retail market.

19   First, SGX has proposed a Bond Seasoning Framework, under which eligible corporate issuers which satisfy certain criteria in relation to size, listing track record and credit profile will be able to re-size wholesale bonds into smaller lot sizes after a six-month seasoning period. These re-sized bonds can then be made available to retail investors via the secondary market on SGX. Eligible corporate issuers can also offer new bonds to retail investors under the same terms as the seasoned bonds without a prospectus.

20  Second, MAS will be implementing an Exempt Bond Issuer Framework. This allows issuers which satisfy more stringent eligibility criteria to offer bonds directly to retail investors without a prospectus.  Corporate issuers can offer retail bonds without incurring the expenses from publishing a prospectus.  Retail investors in turn can buy bonds directly from an exempt bond issuer at the onset, without having to wait six months for the bonds to be seasoned.

21   These proposals have been shared publicly and the response among retail investors in particular, has been positive.

22   To further defray the costs of retail bond issuance, the Government will provide a tax deduction of up to two times for issuance costs attributable to bonds issued under both frameworks. 

23   MAS and SGX are targeting to implement these proposals in the second quarter of 2015. We hope that corporate issuers with strong financials will utilise the new frameworks and tax concession to issue retail bonds, which will enhance the investment choices for Singaporean investors.


24   The second initiative relates to Exchange Traded Funds (ETFs). ETFs, as the name implies, are investment funds that are listed on, and can be bought and sold through the stock exchange. ETFs offer certain advantages compared to unit trusts and single-name stocks:

(i) Management expenses are lower and investors can also avoid the sales commissions that apply to unit trusts;
(ii) They offer investors diversification by investing in a basket of liquid assets e.g. STI-30 stocks; and
(iii) As they are listed on the SGX, ETF prices are transparent.

25   MAS will make it easier for retail investors to access more ETFs. 

26   As you are aware, investment products sold in Singapore, including ETFs, are classified into two categories:

  • Excluded Investment Products (EIP) are simple, commonly understood products such as shares, vanilla bonds, REITs.
  • Specified Investment Products (SIP), are more complex products that are generally derivatives or contain derivatives.

27   Many ETFs are currently classified as Specified Investment Products (SIPs). This means that fewer retail investors can invest in ETFs, as those who wish to must first be assessed for their level of investment knowledge and provided with appropriate financial advice. 

28   The rationale for having a regime to differentiate between complex and non-complex products for retail investors remains sound.  However, MAS recognises the need to update the categorisation of investment products as products become more well-established in the market and investors improve their understanding.

29   MAS recently consulted industry stakeholders on a complexity-risk rating framework that will allow for greater calibration in determining relative product complexity across and within product classes. The market feedback is clear - funds which use derivatives for hedging only are relatively less complex than those which use derivatives to generate investment returns.

30   Therefore, come April 2015, MAS will amend the EIP-definition to allow fund managers to reclassify ETFs which make limited use of derivatives as EIPs.  More retail investors will as a result, be in a position to invest in ETFs which are re-classified as EIPs. We strongly encourage the investment management industry to review the product offerings, and spur greater interest among retail investors through increasing the number and variety of ETFs appropriate to them. 


31   The first initiative I spoke about was on corporate bonds.  Let me now turn to Singapore Government Securities or SGS, which are bonds issued by the Government since 1960s.

32   SGS aren’t just for institutional investors. Individuals, too, can buy SGS as a safe, long-term asset that provides a steady return. However, retail participation in the SGS market has been low, as individual investors lack familiarity with SGS, and some may not want to subject themselves to price risks if they sell the bonds before maturity.

33   I am pleased to share with you a new type of SGS for individual investors which the Government will introduce – the Singapore Savings Bonds. Like SGS, the Singapore Savings Bonds are safe investments, principal-guaranteed by the government.

34   In addition the Singapore Savings Bonds will have two features that will make them more attractive for individual investors:

(i) An individual bond-holder can get his/her money back in any given month, with no penalty1. This means that they do not have to decide upfront how long they wish to invest.
(ii) Bond-holders can earn interest that is linked to long-term SGS rates.  Moreover, unlike bonds that pay the same coupon each year, the SSB will pay coupons that “step-up” or increase over time.  As a result, the effective coupon rates are higher the longer the bonds are held.

35   In short, the Singapore Savings Bonds will offer the higher returns of a long-term bond and give what investors call a “term premium”, while retaining the flexibility of a shorter-term deposit, and the safety of an instrument guaranteed by the Government.  As the name suggests, we hope that the Singapore Savings Bond programme will encourage individuals to save and invest to meet their long-term financial goals and retirement needs.

36   The Government and MAS are still working on the details of the Singapore Savings Bond programme, and will release more details later.


37    As with any new product, it will take time for the market to become more aware and to recognise the benefits of the SSB, and the improved offerings due to the initiatives outlined earlier.  In this regard, the investment management industry can play a meaningful role to help the investing public become savvier.

38   The industry can in turn benefit from having better-informed investors who are more likely to plan for their financial future, seek appropriate financial products,  and be active market participants. They are also less likely to get into misunderstandings with their representatives.

39   The national financial education platform, MoneySENSE has been providing broad-based financial education to Singaporeans, often in partnership with the financial industry, consumer associations, schools and other stakeholders. This year, MoneySENSE will intensify its investor education efforts, with a focus on simple low-cost products.


40   In conclusion, Singapore’s investment management industry has performed well, helping to consolidate Singapore’s place as a premier wealth management centre. To sustain the robust growth of the industry, it is vital that investment managers continue to refresh their investment offerings and raise the quality of financial advice.

41   The IMAS Annual Conference is an opportunity for the industry to share ideas on how to augment and enhance your product and service offerings for different investor segments. I am sure many of you are eager to discuss how to do just that.

42   I wish you a successful conference.

1 For conventional bonds, an investor who sells the bond before maturity is exposed to price risk based on prevailing market price – he may get less than his principal investment. For fixed deposits, banks may levy a penalty for premature withdrawal. An investor in SSB will get full principal back (with the accrued interest) regardless of when he redeems it.