Singapore’s Growing Alternatives Market

Although Singapore has always been well regarded as a regional financial hub, the local government has taken on a number of initiatives in recent years to solidify its position as the go-to financial hub for asset managers in Asia.

The Lion City’s robust regulatory framework, straight forward licensing requirements and level playing field have helped to facilitate industry growth – attracting numerous global fund managers to set up their Asian headquarters in Singapore. As a result, AUM in Singapore has grown rapidly in recent years.

According to Tze Sheng Sum, Country Executive Singapore for Alter Domus, “When US and European fund managers make investments in Southeast Asia, India, or even Australia or New Zealand, they look to establish their hub in a jurisdiction with an established framework, a large network of double tax treaties, and where it’s easy to set up a regional HQ. Singapore offers this, as well as tax incentives for fund managers, making it a very attractive choice.”

For fund managers, operating in Singapore is an advantage because of its clear-cut regulatory framework. The Monetary Authority of Singapore (MAS), Singapore’s central bank and financial regulator, is respected around the world for its clearly defined infrastructure – including fund manager license criteria, application processes and more – as well as its stringent regulations and licensing requirements. As such, many investors see MAS licensing as a plus when evaluating potential funds.

The MAS also recently introduced a Venture Capital Fund Managers license to further attract VC fund managers, and also passed the Variable Capital Company Act last year to lure additional investment funds to Singapore. Tax incentives for funds (such as the 13CA, 13R and 13X schemes) and fund managers (Financial Sector Initiatives – Fund Managers), as well as extensive double taxation treaties with a network of over 90 countries also make Singapore a highly attractive jurisdiction from a taxation perspective.

Singapore’s government also takes an active role in supporting the city-state’s financial sector. Apart from operating sovereign wealth funds which actively invest in private assets, government bodies are also keen to grow the alternative investment space. In 2017, the Intellectual Property Office of Singapore and local private equity firm Makara Capital launched a $1 billion Makara Innovation Fund, and last November the MAS announced a US$5 billion pool to invest in start-ups and entrepreneurs. The government also works as an active co-investor, for example in establishing the Startup SG Equity scheme, which is driven by Enterprise Singapore.

“This type of government funding creates a domino effect for the private sector, which also spills over to the public side. It’s a comprehensive financial ecosystem,” explains Sum.

One of the common challenges faced by finance professionals in Asia is finding exit opportunities for their investments. The rapidly growing economies of Vietnam, Indonesia and the Philippines offer strong business potential, yet it can be difficult for fund managers to monetize their investments when they choose to exit.

Sum comments, “This is where government involvement plays an important role. By participating as potential active investors, governments provide more opportunity for private equity and venture capital funds to monetize their investments.”

While many overseas fund managers attempt to enter the market on their own, a large proportion find the task daunting as even seasoned investment professionals often lack experience in the regulatory and logistical aspects of administering a fund, especially in a new market.

“With a team of 30 people and nearly a decade of experience operating in the city, Alter Domus has the knowledge, relationships and expertise to guide fund managers through every step of the process – from incorporation of vehicles, providing registered office and directorships services – to managing the daily fund operations and ensuring investment managers meet all regulatory obligations when setting up shop in Singapore. Our understanding of the various markets that make up Southeast Asia also proves invaluable when advising clients working across different jurisdictions and regulatory regimes around the region.”

As a specialist service provider dedicated to international, regional and local clients, Alter Domus has the flexibility to develop bespoke solutions for clients – unlike the rigid offerings provided by many larger banks. However, with 2,200 employees around the globe, the firm still has the scale to handle clients with more substantial needs.

“We take a more personal touch. We assess our clients’ needs, their business and their long-term growth strategy, then develop an approach that allows us to grow together over the long term,” concludes Sum. “At the end of the day, Alter Domus’ end-to-end services take care of all aspects of setting up and running a fund, freeing investment managers to focus on generating higher returns for their clients.”