Rolling out the red carpet to Fund Managers in Singapore

Although Singapore High Net Worth individuals (HNWIs) and related wealth are respectively 18% and 238% less than in Hong Kong (Wealth Insight), the singapore asset management industry keeps growing and is expected to become the most important wealth management centre in Asia. While there is not such a big difference between these two financial hubs, let’s have a look at what makes Singapore such an attractive place for wealth owners and managers.

Attractive tax exemption schemes

Singapore tax system offers tax income exemption to both offshore and onshore funds managed by Singapore based fund managers.

  • To benefit, offshore funds must not to be resident in Singapore and not owned 100% by Singapore tax residents.
  • Restrictions also apply as per the percentage of Singapore resident investors in the fund: for both schemes, a financial penalty can be applied above a certain percentage (30%).

In addition to the offshore and Singapore resident schemes, the enhanced tier fund scheme was introduced in order to provide fund managers with similar tax exemption but greater flexibility: no restriction on the percentage of Singapore investors in the fund and fewer restrictions over the choice of fund’s residence. The latter requires however previous approval from the MAS and specific conditions such as a minimum fund size of USD50M.

And additional features that definitely make Singapore an attractive fund’s domicile..

While the offshore and enhanced tier fund schemes can still appeal to fund managers willing to domicile funds in other jurisdictions, specific  features definitely provide additional incentive to set up funds in the Singapore:

  • Access to Singapore large tax treaty network (over 70 countries), allowing funds to benefit from attractive tax rebates when investing in different parts of the world.
  • Dividend payments from a Singapore based fund are tax-exempt.
  • Fund management incentive providing a concessionary tax rate of 10% for fund management and investment advisory activities subject to certain conditions (such as a minimum USD250M Assets under Management);
  • Singapore’s robust legal system and recent inauguration of the SICC (Singapore International Commercial Court) provides additional comfort to wealth owners and position Singapore as an international dispute hub.

Rising pool of emerging wealth in Asia ….and elesewhere

According to Credit Suisse 2014 Wealth Report, the US and UE remained the wealthiest regions in the world in 2014 (USD91trillion and USD85trillion respectively as of 2014). Asia Pacific is however gaining ground very quickly reaching a confortable 3rd rank (USD75trillion including China and India). Most forecasts actually estimate that Asia will have closed the gap or even overtaken the US over the next decade if not earlier.

Less well-known, Sub-saharian Africa is gradually building up, revealing an increasing amount of wealth, without mentioning emerging european countries and Latin America.

Singapore global ambitions

All in all, Singapore has been building a convenient and attractive framework that will definitely support the even growing need for wealth management advisory in South East Asia. But Singapore’s attractiveness as asset management hub shouldn’t be limited to South East Asia as the tax and legal environment provided by the city could also appeal to wealthy individuals from emerging Europe, Middle East and Africa. As a matter of fact, Taurus Wealth Advisors, a Singapore based multi-family office recently applied for a license to operate in the Middle-East with the ambit of gaining access to African clients. A sign among others that the City’s limited territory doesn’t match with its unlimited potential and ambitions ..

Sources: Wong Partnerhip -Wealth Insight – BCG – PWC- Credit Suisse Global Wealth

FUND MANAGERS LOOKING FOR CRYSTAL BALLS

While the whole community of fund managers is keeping a close eye on daily news, in the wait of the next “big event” (be it monetary, economic or geopolitical), one has to acknowledge that the job has never been so complicated. In a context of increasing investors fleeing professional management for low-cost ETFs and total uncertainty about markets trajectory, I guess many of them would rather prefer to go for a fortune teller reading! Although it is clearly unproper for a Fund Manager or even an eminent economist to acknowledge the fact that you honestly don’t have any clue of how markets are going to move over the next 12 months….I trust most of them are suffering from severe headaches!

Acknowledging that nobody can accurately know..

And what if investors simply acknowledged the fact that in a current context, it is simply impossible to accurately forecast the next 12 months? Releasing the pressure would undoubtly provide restful time to step back and wait for good momentum. In the meantime, fund managers and economists are arguing about 1/the positive or negative effects of lower commodities prices 2/potential consequences of Europe and Japan QE whereas the Fed was contemplating a rate increase 3/inflation or deflation risks…etc. Whatever are the opinions, this is pretty hard to forecast in which direction things will move over the next months.

Emerging markets are tempting but require expert and local knowledge

In such a low-rate environement, investors are definitely tempted with higher yielding but this is not without risks and it requires a good markets understanding so as to capture true value. While emerging markets are certainly risky they also provide rewarding yields and can represent an excellent option if integrated in a well-balanced portfolio and managed by country experts.

Local/ regional expertise provides true value

Whatever the investment strategy, current markets conditions will definitely require active management and global diversification. While investors had been gradually fleeing towards low-cost ETFs , current situation might be positive and turn them back towards expert professionals: albeit they don’t qualify yet for fortune telling, local experts are definitely worthy in such a global and shaky environment. At Athenia-Link we strive to introduce quality fund managers, experts on their local markets because we trust that niche expertise is definitely worthy.