PASLA market profile: Singapore

Anonymous. Global Investor. London: Feb 2010.

Abstract (Summary)
The Monetary Authority of Singapore has worked hard over the years to ensure a regulatory
environment that helps build the financial sector. The regulator has made determined efforts to
attract and grow the buy-side community, including asset management firms, hedge funds,
private banking and corporate treasury industries. The global credit crisis and the Madoff hedge
fund scandal, which has embroiled some top names in the global hedge fund industry, has
prompted regulators around the world to review their regulatory framework. A stable regulatory
regime has always been one of the main attractions for setting up a hedge fund in Singapore,
along with a highly skilled workforce, a stable and growing economy, and an attractive life style.
Particularly attractive to hedge funds to date has been the regulator's determination to provide the
right tax environment for hedge funds and other asset managers.
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Full Text
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( (c) Euromoney Institutional Investor PLC Feb 2010)

Note: Singapore has had to bend to new global best practice and implement rules that go against
a policy that has successfully built a hedge fund industry on the island
The Monetary Authority of Singapore has worked hard over the years to ensure a regulatory
environment that helps build the financial sector. The regulator has made determined efforts to
attract and grow the buy-side community, including asset management firms, hedge funds,
private banking and corporate treasury industries.
However, indications are that the push to build a "light touch regulatory framework" in an effort
to attract hedge funds may have received a setback. Reports suggest that the central bank will
require hedge funds to be licensed, as part of a drive to tighten the rules. Hedge funds have so far
been exempt from holding a capital market services licence, so long as they manage funds for 30
or fewer qualified investors.
Michael Coleman, chairman of AIMA's local branch, said that "almost certainly there will be a
move away from the current exempt regime to some form of licensing." The fear is that the new
regulations would cramp an industry that has been assiduously built up over the years. If so, this
move would represent a retreat from the policy of light-touch regulation, which has successfully
attracted hedge funds to the island state.
"Hopefully those changes will be well thought through and won't damage the industry, which I'm
very confident they won't," said Coleman. As the industry representative, he has been pressing
the need for a balance between the need for closer monitoring of hedge funds and the increased
cost this would entail. MAS, for their part, have said they have to fine tune their regulatory
framework in the light of evolving global best practice and to reflect recent developments in the
hedge fund industry.
The global credit crisis and the Madoff hedge fund scandal, which has embroiled some top
names in the global hedge fund industry, has prompted regulators around the world to review
their regulatory framework. The Madrid-based International Organization of Securities
Commissions (IOSCO) has demanded new rules that would give regulators oversight to the risk
taken on by hedge funds in their trading strategies.
Last June, IOSCO said hedge funds should be required to register and disclose data to regulators
to guard against their trading destabilizing financial markets. Its guidelines also suggest that
financial watchdogs worldwide should have the authority needed to collaborate and share data to
track globally active funds and managers. The measures are aimed at addressing gaps in
oversight that contributed to the global financial crisis.
Licensing requirements would increase costs to hedge fund operations, especially the start-ups.
AIMA estimates the Singapore hedge fund industry manages $35 billion in assets, excluding
those managed by global firms. Singapore is home to 12% of the Asia-focused hedge funds. The
industry has grown from a near standing start in 1997 to now having 138 single-strategy hedge-
fund managers, employing more than 800 professionals.
A stable regulatory regime has always been one of the main attractions for setting up a hedge
fund in the city state, along with a highly skilled workforce, a stable and growing economy, and
an attractive life style. Particularly attractive to hedge funds to date has been the regulator's
determination to provide the right tax environment for hedge funds and other asset managers.
Much of this growth has been due to foreign money and global hedge fund operations
establishing an office in the city state. But the aim of the regulator has been to encourage the
growth of an indigenous hedge fund industry. Peter Douglas, principal of GFIA, a Singapore
hedge fund consultant, said that last year almost half of the assets of Singapore-based hedge-fund
managers were sourced from Asian investors. The Asian industry's assets had "historically been
sourced overwhelmingly from outside the region. It's a very welcome development as it suggests
a more stable investor base that may not be so panicked by Asian market cyclicality."
Tony Tan, deputy chairman and executive director of the Government of Singapore Investment
Corporation, one of the state's two sovereign wealth funds, spoke for the region when, addressing
a conference last January, he said: "My belief is that the next decade could be the Golden Era for
Asia". Temasek Holdings, the other of Singapore's two sovereign wealth funds, is also looking to
launch what could become Asia's biggest hedge fund platform, to be called Seatown Holdings.
Hedge funds focused on Asia excluding Japan gained 37.4% in 2009, outstripping a 23.5%
increase recorded by US funds. In February, top hedge funds Moore Capital, Maverick Capital,
Viking Global Investors and Stark Investments all revealed they were planning to open offices in
Asia over the next few months to meet investor appetite for a slice of Asia's growth. Whether
they establish themselves in Hong Kong, mainland China or Singapore remains to be seen. Soros
Fund Management, GLG Partners among many others have also indicated plans to establish a
presence in Hong Kong or Singapore.
305 PQ 1285463805

Indexing (document details)

Subjects: Regulation of financial institutions, Hedge funds
Classification Codes 9179 Asia & the Pacific, 8130 Investment services, 4310 Regulation
Locations: Singapore
Author(s): Anonymous
Document types: Feature
Publication title: Global Investor. London: Feb 2010.