Despite the political uncertainty that plagued much of 2016, which resulted in volatility in the markets, the asset management industry in Singapore has generally remained resilient. As noted by the Monetary Authority of Singapore (MAS) in its annual report 2016-17, Singapore's asset management industry grew 7% in 2016, with assets under management of around US$1.96 trillion.
The asset management industry in Singapore has been quite lively this year with a strong pick-up in new private fund launches by Singapore-based managers. The ease of doing business in Singapore, the option of utilising a variety of onshore and offshore fund vehicles, and the availability of tax incentive/exemption schemes have made Singapore an attractive start-up destination.
The hedge fund scene in Singapore has seen much vibrancy owing to, among others, "star" fund managers leaving more established fund management houses to set-up on their own, proprietary trading teams being spun off from banks, corporate groups establishing their own fund management arms, family offices and international hedge fund managers setting up local operations in Singapore. The ever-growing alternative investment fund industry has resulted in fund structures becoming increasingly sophisticated, as these structures are driven by a wide range of issues, such as tax, regulatory, currency, marketing, geography and timing.
Recent commentary from the Singapore Venture Capital and Private Equity Association highlighted Singapore's fast developing private equity and venture capital (PE/VC) industry. In 2016, assets under management of PE/VC fund managers in Singapore grew more than 20% to exceed US$35 billion. There has been much interest in the venture capital space, with venture capital investments by Singapore-based managers growing more than four times to reach US$1.6 billion. As part of the broader efforts of the MAS to promote financing for enterprise development, on 15 February 2017 the MAS published a consultation paper proposing a simplified authorisation process and regulatory framework for managers of venture capital funds (VC managers). Once the proposed new regulatory regime for VC managers is implemented, new VC managers can expect a much simplified and expeditious authorisation process.
More recently, with initial coin (or token) offerings (ICOs) gaining popularity in the region, there has also been increasing interest in the launch of cryptocurrency funds by Singapore-based fund managers. While it has been some time since the advent of digital currencies, there currently appears to be a burgeoning demand for such cryptocurrency-related investment products.
In the wake of such increasing interest the Commercial Affairs Department and the MAS had on 10 August 2017 jointly issued a consumer advisory on investment schemes involving digital tokens (including virtual currencies) (Consumer Advisory). The Consumer Advisory highlighted various risks that are worth considering by consumers, including: (a) foreign and online operators, (b) sellers without a proven track record, (c) insufficient market liquidity, (d) highly speculative instruments, (e) investments promising high returns, and (f) money laundering and terrorism financing.
The legal and regulatory environment pertaining to the digital token and currency space is evolving rapidly and will need to be watched closely by stakeholders in the sector. It is clear, from recent public announcements, that the MAS is looking closely at the space.
Singapore strives to continuously strengthen the resilience of its asset management industry, and its regulators regularly consult the industry on issues affecting them. This, coupled with Singapore's political stability, rule of law and excellent infrastructure presents an exciting prospect for fund managers looking to establish or expand their business.