Singapores Hedge Fund Industry Upbeat

Singapore is witnessing a rise in the number of hedge funds that are being setup

in the city indicating its favorable regime for the fund management industry.

Following the central banks proposal in April to to exempt small hedge funds from the licensing requirement, there has been a sudden surge in the number of hedge funds that were set up in the city state during May and June. According to hedge fund tracker Eurekahedge, seven new hedge funds have set up operations in Singapore during May and June.

One of the major reasons for the growing popularity of Singapore as a hedge fund location lies in its relatively light regulatory regime for fund management a crucial factor that most fund managers take into account while deciding where to start up. Under the current legislation, small or boutique fund managers, with less than 30 qualified investors are exempt from licensing requirements in Singapore. Furthermore, the Monetary Authority of Singapore has proposed that hedge fund managers with less than S$250 million and with less than 30 qualified investors be exempt from the licensing requirement. However, they will be required to maintain a base capital of at least S$250,000. Additionally, they will have to notify MAS about their business. Despite the pending legislation of the proposed revisions, hedge funds are moving to the city-state and are eager to setup operations.

Another factor that works towards Singapores advantage is its tax incentives for the fund management industry. For instance, certain qualifying onshore funds and offshore funds that are managed by Singapore-based fund managers are exempt from Singapore tax on specified income. Additionally, fund managers in Singapore are taxed at a concessionary rate of 10% on fee income, subject to certain conditions and MAS approval. Moreover, Singapore extensive tax treaty network serves to reduce tax liability in treaty countries that funds invest in.

Singapore is also regarded as a trusted financial center that enforces strict anti-money laundering regulations. Operating costs are lower in Singapore, as compared to other jurisdictions. The countrys political and economic stability are other enabling factors. According to Mr. Darren Leow, a senior member of the editorial team at SingaporeStartup.com,

An increasing number of foreign hedge funds are choosing Singapore Incorporation. Algebris and Fortress are said to have moved here and we can expect other players to follow suit. Singapores business friendly environment and tax structure are pull factors that hedge fund managers find hard to ignore.

According to statistics released by the MAS, there are currently 512 exempt fund managers in Singapore and their numbers are set to grow. According to the MAS, the total assets under management of the Singapore hedge fund industry held steady at S$59 billion (approximately US$42 billion) as at end-2009.

by: Carolyn Zheng

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