Ms Jacqueline Loh, MAS’ Deputy Managing Director, spoke about the key trends and opportunities in Asian financial markets – focusing on opportunities from harnessing technology and in sustainable finance.
Keynote Address by Mr Ong Ye Kung, Minister for Education and MAS' Board Member, at the Investment Management Association of Singapore-Bloomberg Investment Conference 2019 on 9 May 2019
Ms Maggie Ng, Head of ASEAN of Bloomberg,
Ladies and Gentlemen,
1 I am delighted to join you at the IMAS-Bloomberg Investment Conference 2019.
2 This is the 20th year that IMAS is holding its annual conference. The inaugural partnership with Bloomberg marks this significant milestone and further demonstrates the conference’s status as the leading buy-side event in Asia.
3 This year’s theme is ‘Reimagining Tomorrow’. Indeed, the global investment management industry is undergoing massive transformation. New technologies and shifting investor preferences are changing the way funds are managed and investors want to be engaged. We need to reimagine the future of investment management.
Asia investment climate remains positive
4 But let us cast our eyes to Asia, which investment climate remains positive. Global economic expansion has moderated following strong growth in 2017 and early 2018, reflecting a confluence of factors including an increase in US-Sino trade tensions, and a decline in business confidence. Last month, the International Monetary Fund (IMF) cut its forecast for global growth this year by 0.2% to 3.3% – the lowest since the global financial crisis.
5 Notwithstanding, Asia remains a bright spot. It is a young, and urbanising region. Further, investment penetration levels remain low. So there is a lot of headroom to grow. Indeed, assets under management in Asia Pacific is expected to grow faster than any other region globally, almost doubling from 2017 to about US$30 trillion in 2025.
6 Within Asia, there will be a few major investment and fund management hubs, of which Singapore can be a significant one, for the following four key factors.
First, we have built a vibrant ecosystem that continues to grow.
7 There is a growing community of private wealth and institutional investors, traditional and alternative managers, and service providers that have chosen Singapore as their base. For example:
- Public asset owners such as Swiss National Bank and CDPQ (Caisse de depot et placement du Quebec) have established and grown their investment offices here.
- Global insurer AIA has recently set up a new asset management company to provide centralised services to the group, including dealing, regional and specialist fund management.
- Private Equity and Venture Capital funds are vying to be here to uncover the next unicorn start-up. One notable example is Softbank, which has just set up a regional investment office in Singapore.
8 We are therefore well positioned to serve as the enterprise financing hub for growth companies in Asia. MAS will continue to work with partners to improve the ecosystem, for example:
- Later this year, we will be launching a new corporate structure for investment funds – the Variable Capital Company (VCC). The VCC framework is a game-changer, and will put Singapore on the same league as other global fund hubs. The VCC can be used by both open-end and close-end funds, and for both traditional and alternative strategies. This will encourage Singapore-based fund managers to co-locate fund domiciliation with their fund management activities, and allow Singapore to capture the full fund management and value chain here. This will further deepen our fund servicing ecosystem, and create new business opportunities for a wide range of professions such as lawyers, accountants, tax advisors, fund administrators and custodians in Singapore.
- To catalyse and channel financing into enterprises, MAS introduced a simplified regulatory regime for VC fund managers in 2017. Today, 57 managers are operating under the new regime.
- In 2018, we also launched a deal making platform – Meet ASEAN’s Talents and Champions (MATCH), which has generated more than 17,000 matches from 380 investors to date.
- We are also working with the Singapore Venture Capital & Private Equity Association and Cambridge Associates to create an inaugural performance benchmarks for PE and VC funds focused on Southeast Asia.
Second, there is fresh demand, from areas such as infrastructure investment.
9 Currently, more than 90% of infrastructure investment in Asia is financed by governments.
- Under the “Belt and Road initiative” (BRI), Enterprise Singapore is partnering Chinese banks for debt financing of infrastructure projects. The Belt and Road Insurance Consortium in Singapore is providing risk mitigation solutions. Recently, China’s Silk Road Fund and Singapore’s Surbana Jurong firmed up plans to co-invest US$500 million in an Infrastructure Fund that will focus on greenfield infrastructure projects in Southeast Asia.
- We set up Infrastructure Asia – a government office to connect local and international participants in infrastructure development, and enable information exchange and access to various professional services.
- We will continue to develop infrastructure into a mainstream, investible asset class by creating infrastructure debt distribution facilities to attract institutional investors. The maiden Infrastructure Take-out Facility pilot transaction by Clifford Capital last year is a good example.
Third, we are a living lab for technology and innovative solutions.
10 The future of investment management will be defined by data and technology. Technology will bring about significant change, by making trades much simpler and faster to execute, and enabling firms to use data to design better products for end investors. There is great promise for better customer engagement and operational efficiency.
11 Investment managers in Singapore have a strong starting position. Singapore is a conducive place for experimentation and innovation, where the market is sophisticated, rules are transparent and the regulatory environment is highly trusted. So what works in Singapore is often regarded as a trust mark around the world.
12 Specifically, in the area of finance, MAS started our FinTech journey in 2015 and have succeeded in building a thriving FinTech ecosystem, including the largest FinTech Festival in the world today. There are many opportunities for investment managers to collaborate with FinTech firms and start-ups here.
13 Investment managers can also leverage on MAS initiatives to support their digital transformation.
- In November 2017, MAS introduced an Artificial Intelligence and Data Analytics (AIDA) Grant to promote the adoption and integration of artificial intelligence and data analytics in financial institutions. Tapping on this grant, the investment management industry has deployed deep reinforcement learning algorithms to enhance their investment techniques.
- Investment managers can also leverage the API Exchange. This is a global, open-architecture platform that is made up of both a marketplace and a sandbox. In the marketplace, financial institutions can discover hundreds of FinTech solutions and directly engage FinTech firms. The sandbox provides a platform for financial institutions and FinTech firms to co-create solutions, and deploy them rapidly to underserved markets with the use of APIs. Today, more than 50 financial institutions and 100 FinTechs from around the world have joined the API Exchange.
Fourth, we embrace skills and talent.
14 Technology alone cannot fully transform the industry. We also need the right people and skills. This is why we must continue to develop our talent pool based on continuous learning and upskilling of our people, while remaining open to global talent for skills and expertise that complement our local workforce.
15 MAS and The Institute of Banking and Finance (IBF) released a report last month identifying skills for a more competitive financial sector workforce. The report recognises that data analytics and automation will transform jobs and tasks in the near to medium term. More importantly, it underscores the need for the industry to translate growth into jobs for people, and better lives for its workforce.
16 To better prepare the workforce for the future, IBF has rolled out several initiatives.
- It implemented the Professional Conversion Programmes (PCP) for the industry since April last year, to pre-emptively re-skill employees whose roles are impacted by change. IBF has secured commitment from 19 financial institutions to reskill 4,000 existing finance professionals.
- The recently launched Technology in Finance Immersion Programme will provide mid-career professionals the opportunity to acquire relevant skills and convert to new careers in technical job roles in the financial services sector.
- In August last year, IBF launched the Careers Connect service together with the industry and financial sector workers’ union, to help our workforce navigate career changes. Careers Connect has since served over 600 finance professionals.
17 At the same time, companies must also change their hiring strategies by broadening their targeted talent base. If a company hires only staff with a certain number of years of experience in the sector, your potential talent pool will be quite small, and may not necessarily possess all the skills and know-how needed for the future.
18 Here, the Tangent Apprenticeship Programme, a social initiative started by The Majurity Trust, offers an enlightened approach to hiring. Tangent hopes to get firms to hire staff who may not possess the relevant experience or qualifications, but have the attributes to do well. Dymon Asia Capital has piloted Tangent and successfully hired 4 mid-careers executives.
19 One of them is Aaron Young, a Tangent Apprentice currently undergoing a one-year training programme. The programme taps on the PCP to help him pick up essential skills for a new career at Dymon Asia. Although he did not have any prior experience in the fund management sector, he has the core attributes to do well.
20 I would say all around the world, Singapore is one of the few countries with a national programme to upskill our workforce for the future. We call it SkillsFuture. The PCP initiative that I mentioned earlier come under the broad umbrella of SkillsFuture, which we are rolling out to every industry, and for all age groups. Only then can we move an entire workforce to meet the challenges of the future.
Conclusion – Creating value for the society
21 Let me conclude with one more unlikely reason why investors should consider Singapore. That is our societal ethos.
22 We know that businesses need to be financially viable, so that it can sustain its operations, grow, create jobs and promise shareholders good returns. Capitalism is the best economic system we know. It has played a central role in improving the well-being of many societies, and will likely to continue to do so.
23 On the other hand, capitalism is constantly criticised throughout human history, and especially so post Global Financial Crisis. It is blamed for exploitation of workers, destruction of traditional small businesses, causing social inequality, greed and degradation of the environment.
24 We therefore have to see capitalism as part of a larger solution to human problems. It provides the motivation for enterprising people to start businesses, invest, create wealth and enlarge the economic pie. But then the individualistic motivation it needs should be tempered by a social consciousness, and in a redistributive system that ensures as many members of society have a share in the pie, and cohesive communities that help out one another.
25 So economic growth and well-being of people go hand in hand. Capitalism and social cohesion are two sides of the same coin, and one cannot do without the other. In Singapore, our people fundamentally wish businesses well, because we know all our jobs and incomes are at stake if businesses and industries fail.
26 At the same time, I would say businesses in Singapore by and large also have a desire to contribute to society. This goes beyond the occasional Corporate Social Responsibility projects, but embracing a larger concept of business success that is beyond investment returns and profits, and aligning business activities with social causes and concerns.
27 Many businesses, including those in the investment management industry, acknowledged this publicly. Since March 2017, IMAS has expressed support for global and local standards, such as the UN Principles for Responsible Investments and the Singapore Stewardship Principles for Responsible Investors. It has also been working with the World Wildlife Fund (WWF) to build industry capacity in ESG and sustainable investing.
28 Impact funds here such as Insitor Impact Asia Fund and Garden Impact Investments help investors channel resources to promote financial inclusion, create jobs and alleviate poverty in the region. Quadria Capital, a healthcare focused private equity fund in Asia, seeks to increase access to affordable and quality healthcare to underserved populations.
29 Investors are showing keen awareness too. According to a recent survey by BNP Paribas, 55% of institutional investors in Asia expect to allocate 50 to 75% of their assets to funds that incorporate environmental, social and governance factors. Close to a third of high-net-worth Singaporeans surveyed by Standard Chartered Private Bank also expressed their inclinations to invest between 15 and 25% of their funds in sustainable investments in the next three years.
30 To conclude, Singapore’s investment management industry has performed well amidst slower global growth and an uncertain environment. A vibrant ecosystem, fresh demand for investments, strong support for technology and innovation, and concerted effort in talent and skills development – these are factors that will help the industry continue to thrive up to the medium term. But for the long term, it is our social ethos, and the ability to hold investors, industry and people together, that will bode well for Singapore.
31 I wish you a fruitful discussion. Thank you.