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Singapore as a financial hub: The next lap

Published Thu, Nov 14, 2013 · 10:00 PM
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OVER the past decade, Singapore has taken great strides in the area of wealth management, including taking steps to make itself attractive as a trust domicile. Next in line is a reinvention of the fund management industry. In this respect, two major parallel initiatives are underway in terms of the development of a cross-border funds passport, which would facilitate the marketing and distribution of funds across the region. One is an agreement to get a collective investment scheme framework off the ground for the Asean region. The second is an intent to jointly develop an Asian funds passport, involving Singapore, Australia, South Korea and New Zealand.

There is a third and arguably even more pivotal proposal: that Singapore should re-examine its legal framework for investment funds to encourage more asset managers to choose to domicile their funds here. The stakes are potentially enormous, as wealth burgeons in the region and more of the wealthy choose to book their assets in Singapore. The MAS annual fund management survey at end-2012 reflected total assets under management (AUM) here of about $1.6 trillion, an increase of 21 per cent from the previous year. The five-year average growth rate in AUM is about 9 per cent per annum. The catch is that most of these funds are likely to be domiciled in offshore centres such as Cayman Islands or Luxembourg because of the inflexibility of the existing structures open to funds in Singapore. At the moment, investment funds that want to be domiciled here have to be set up as trusts, limited partnerships or private companies, which fail to cater to the needs of various types of investors.

In a paper last week, however, PwC has proposed a change of rules to allow funds to be set up under corporatised investment vehicles, such as open-ended investment companies, which offer a number of benefits. Funds in such structures can benefit from tax treaties, for instance, and provide flexibility in terms of share subscriptions and redemptions. The proposal has come none too soon. Hong Kong has started the ball rolling with the intent to create a similar framework and establish itself as a "world factory" for asset managers. Creating an integrated ecosystem here for funds can generate business for various support services such as legal and accounting services, and fund administration, further enhancing Singapore's status as a financial hub.

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