MAS launches US$5b kitty to woo fund managers to drop anchor here

Singapore

THE Monetary Authority of Singapore (MAS) is making a US$5 billion move to anchor fund managers in Singapore, in preparation for a scale-up in private market activity.

This is the first time it is launching a fund for private market investments, to be managed by top global private equity and infrastructure fund managers. The managers must either be committed to deepening their existing presence in Singapore or establishing a significant one.

Under the programme, MAS will allocate US$5 billion of its own capital as part of its investment in the private markets asset class.

The fund was announced on Tuesday by Enterprise Singapore chairman and MAS board member Peter Ong at the Global Investor Summit, which is being held during this year's Singapore Fintech Festival.

In his keynote address, he highlighted that companies are staying private longer. He said: "There is now a greater recognition among Asean companies that private capital is not simply just another source of funds, but also a key form of 'smart capital' that comes with technology, business know-how and networks useful to companies to grow and scale."

Already, the fund is generating some buzz among observers. Justin Ong, Asia-Pacific Asset and Wealth Management Leader of PwC Singapore, told The Business Times that MAS' move is similar to what the authorities did back in 1994, when they were looking to develop the Singapore asset management industry by giving out up to S$30 billion to managers who set up in Singapore.

"Private equity, venture capital and infrastructure are key themes in the current MAS Financial Services Transformation Map, and it is not surprising that they would look to provide incentives for managers setting up new private equity, venture capital and infrastructure investments and capabilities in Singapore, to position Singapore as the upcoming investment hub for such asset categories," he said.

"This is a very smart move, and will certainly interest a lot of asset managers to commit to building up in Singapore so as to get access to the funds available for management."

Last month, the authorities passed into law a new type of entity called the Variable Capital Company, which will allow funds to both manage from and domicile in Singapore. The move is aimed at boosting the fund management ecosystem in Singapore.

A report by Bain & Co counts more than 220 private equity and venture capital managers that are now located in Singapore. In the last five years, their assets under management have grown at a compound annual growth rate of 28 per cent to reach S$190 billion.

Rekanext Capital Partners managing partner Ambar Machfoedy pointed out that organisations and fund managers that have traditionally invested in listed or more mature companies have begun showing more interest in the private market. Even international financial organisations like the Asian Development Bank (ADB), which traditionally finances public infrastructure projects, is beginning to look at private sector early-stage ventures, he said.

"As I understand it, ensuing from the success of its Mekong Business Initiative, the ADB has recently set up a venture unit which will support the development and growth of early-stage ventures," he said.

The Mekong Business Initiative is a partnership between the ADB and the Australian government to accelerate growth in Cambodia, Laos, Myanmar and Vietnam.

Chris Tran, head of Asia at North Ridge Partners, said the value of private money compared to public market investments lies in the time allowed for the firm's growth, as well as the working nature between investors and firms.

"Private money can be patient and have a longer-term horizon, compared to public-market investments, which demand quicker returns."

He added that investors can also add value to firms through their strategic networks and operational experience. This ultimately goes towards creating a more vibrant ecosystem.

On this note, Thomas Lanyi, chairman of the Singapore Venture Capital & Private Equity Association (SVCA), told BT that the impact of the fund will extend beyond the fund-management circle.

"The increase in assets under management will encourage the growth of local talent - not only in the private equity fund management industry, but also the entire ecosystem of legal and financial advisory, business consulting, risk management and fund administration - and ultimately drive investment into tomorrow's corporate champions in the region."

READ MORE: Asean fintechs attracted 25% more funding this year: report