"The Wellness of Investing - Eating Well, Sleeping Well, Feeling Well" - Keynote Remarks by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, at SIAS 1st Master Series Investment Conference on 11 July 2019
- You are a long-standing supporter of MoneySense, the national financial well-being programme, helping us to deliver financial education messages so that investors can make better informed decisions.
- eating well;
- sleeping well; and
- feeling well.
- While public markets will continue to be the mainstay of investing, the search for yield will inevitably take us to private markets.
- The rise of private markets has been a structural trend for about two decades now.
- Identifying opportunities in private markets while minimising risk will be a key theme in the future of investing.
- Demographics is one of the few trends we can predict with a degree of certainty.
- The ageing of the population will be a reality across emerging Asia in the coming years, with the exception of South Asia.
- Population ageing is happening alongside rising affluence – a combination that underpins strong demand for pension funds and retirement savings products, to provide peace of mind in one’s golden years.
- Where we put our money drives action. And an existential issue demanding action on a global scale is climate change.
- Investing in sustainable assets imbues investment with a larger social purpose.
- For the first time since 2006–07, the value of listed US companies going private in 2018 exceeded the value of private companies going public, causing a net outflow from the US public markets.
- PE/VC assets under management have risen by a compounded annual growth rate of 22% over the last five years, to reach nearly US$0.9 trillion in 2018
“Asia-Pacific Private Equity Report 2019”; Bain & Company .
- 2017 PE and VC investments into ASEAN was US$24 billion, almost three times the deal flow in 2016
“Southeast Asia PE & VC: Investment Activity May 2018”, SVCA . - Bain & Company estimates at least US$70 billion of PE and VC deals and more than ten unicorns emerging over the next five years in Southeast Asia.
- There is an explosion of entrepreneurial energy across ASEAN.
- The region has seen the rapid rise of well capitalized, innovative businesses such as Grab, Gojek, and Tokopedia.
- With a growing middle class and widespread urbanisation, the consumer, technology, and health care related sectors are expected to grow rapidly in ASEAN.
- Growth companies in these areas are scaling up and internationalising, which requires raising new capital – with a growing volume coming from private markets.
- Singapore has a diverse ecosystem of 240 global and regional PE and VC managers. They managed S$220 billion of assets as of 2018, up 15% from the year before.
- Entrepreneurs from across Asia are coming to Singapore to raise capital for their expansion.
- Singapore itself has become a thriving launch pad for tech start-ups, and is a natural hunting ground for the next unicorn.
- Deep and diverse private markets offer investors an opportunity to tap on the returns potential of Asia’s growth companies.
- We have streamlined the admission criteria and business conduct requirements.
- This has facilitated faster time-to-market for VC managers, and increased access to financing for start-up and growth stage businesses.
- Last year, Capbridge Platform obtained MAS’ approval to operate its private securities exchange as a Recognised Market Operator in Singapore.
- These funds will be placed for management with top global PE and Infrastructure fund managers who are committed to deepening their existing presence or establishing a new and significant presence in Singapore.
- There has been keen interest from PE and infrastructure managers, and MAS has already funded a few managers who have met our investment and developmental objectives.
- MAS’ total commitment to PE and infrastructure funds under this programme is currently just over US$550 million.
- Deal Fridays began last month and will take place every Friday until the Singapore FinTech Festival cum Singapore Week of Innovation and Technology in November.
- Last year, MAS surveyed angel investors, family offices, and venture capitalists to try to get a sense of how much money is potentially on the table.
- By their own account, there is about US$12 billion in total available for direct investment into ASEAN start-ups during 2019-21.
- We hope that Deal Fridays can encourage the deployment of this capital.
- 2018 was a milestone of sorts: for the first time in human history, persons aged 65 or over outnumbered children under 5 years of age.
- The rate of demographic ageing will be particularly rapid in Asia.
- The proportion aged 65 or over in East and Southeast Asia is expected to increase from 11% in 2019 to 24% in 2050
“World Population Prospects 2019”; United Nations, Department of Economic and Social Affairs .
- The proportion aged 65 or over in East and Southeast Asia is expected to increase from 11% in 2019 to 24% in 2050
- Starting early gives you more time to reap the benefits of compounding interest.
- Insurers are selling products that encourage regular savings, in order to receive a steady stream of income during one's retirement years.
- According to Life Insurance Association, the number of such policies taken up last year in Singapore increased by about 50%.
- There are also unit trusts that provide a regular monthly dividend.
- Last year, we doubled the individual limit for holding SSBs to S$200,000, due to the increased appetite for safe investments.
- Succession planning and intergenerational wealth transfer have moved up the agenda.
- A growing number of affluent families are consolidating their wealth through trusts and family offices, to optimise investment and legacy planning.
- There is political and economic stability, a clear regulatory regime, a comprehensive network of tax treaties to avoid double taxation, and a robust ecosystem of professional services.
- The number of family offices in Singapore has increased four times between 2016 and 2018.
- We continue to see strong interest from families to set up in Singapore
- We are raising the level of professionalism of family wealth advisers by partnering institutes of higher learning to develop and provide customised training.
- We are also strengthening networks between family offices in Singapore, to facilitate mutual learning and joint investments.
- Extreme weather events like floods can impair asset values, at least in the short-term.
- Changing climactic conditions – like rising sea levels – can have much more lasting effects on the value of exposed assets.
- According to the UN Economic and Social Commission for Asia and the Pacific (UNESCAP), the number of catastrophic events in the Asia Pacific rose from an average of 44 annually in the 1970s to 126 in the early 2010s.
- CDP Worldwide, an international environmental non-profit, estimates that a group of the world's largest companies potentially faces US$250 billion in asset write-offs within the next 5 years due to climate change related risks.
- Countries that signed up to the Paris Agreement in 2015 have pledged to limit the increase in global average temperatures to between 1.5 degrees Celsius to 2 degrees Celsius above pre-industrial levels.
- What does this potentially mean in practice? According to the International Energy Association (IEA), limiting global warming to 1.5 degrees Celsius means that renewables have to make up 70 - 85% of electricity production by 2050. It was only 23% in 2015.
- Technological advances and increases in production capacity have dramatically reduced the cost of renewable energy sources like wind and solar.
- If R&D on long duration energy storage technologies is successful, it will solve the problem of intermittency that currently hinders the scope for renewable energy to supply electricity round the clock.
- Changes in technology that make renewables economically viable could potentially leave many traditional energy assets stranded – and this has serious implications for investors.
- This is not something happening far from home.
- A study by the Carbon Tracker Initiative estimates that as much as US$60 billion of coal assets across Southeast Asia can no longer yield the expected economic return in the next decade due to tighter environmental policies and competition from cheaper renewable energy.
- Conversely, as climate change mitigation efforts intensify globally, environmentally responsible companies can be expected to outperform their benchmarks.
- The Asian Development Bank has estimated that developing Asia needs to spend US$1.5 trillion annually on infrastructure up to 2030.
- What is less well known is that climate mitigation and adaptation costs will add another US$200 billion to the region’s annual investment needs.
- MAS is working on a comprehensive, long-term strategy to make sustainable finance a defining feature of Singapore’s role as an international financial centre, just as wealth management and FinTech have become.
- The introduction of the Green Bond Grant scheme two years ago is an example.
- The grant aims to level costs associated with issuing a green bond versus that of a conventional bond and to promote the adoption of internationally accepted standards on sustainability.
- To-date, some S$6 billion worth of green bonds has been issued here by local and foreign companies.
- The grant is now renamed as the Sustainable Bond Grant Scheme.
- We also lowered the minimum issuance size requirement for the scheme, which will allow more qualifying issuers to gain access to the grant.
- The Singapore Exchange (SGX) has introduced the comply-or-explain sustainability reporting requirement for listed companies in 2016.
- We need to enhance the level of knowledge in sustainable finance amongst industry professionals as well as companies that are reporting on their sustainability practices or looking to issue green bonds.
- MAS is working with partners, such as the Institute of Banking and Finance, SGX, the Asia Sustainable Finance Initiative and our universities, to introduce capacity building courses in sustainability for finance professionals and officers of listed companies.
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