The Monetary Authority of Singapore (MAS) is working on two initiatives to develop the ecosystem around the local fund management industry.
The first initiative, which is being studied by MAS and the Accounting and Corporate Regulatory Authority (Acra), is to introduce an open-end investment companies (OEIC) framework for mutual funds. This is aimed at encouraging more funds to be legally domiciled here.
The OEIC framework is targeted to be rolled out in a year. It is "expected to encourage more asset managers to domicile their funds here and promote the development of the fund administration industry in Singapore", said Indranee Rajah, Senior Minister of State for Law and Finance.
The framework will cater to the core activities of an investment fund, including the issuance and redemption of shares on a regular basis, valuation of a fund's net assets, and the appointment of fund managers and custodians. It will also allow for an umbrella fund structure containing several operationally distinct sub-funds.
A second initiative is to enhance the external fund manager (EFM) programme, where private sector fund managers can manage a portion of Singapore's reserves with MAS.
Ms Indranee said stronger incentives will be offered to managers "committed to building their investment capabilities and strengthening their local talent pool to support the long-term development of their Singapore operations".
She was speaking at the 17th annual conference of the Investment Management Association of Singapore (IMAS) on Wednesday.
The Business Times understands that currently, mutual funds can be domiciled in Singapore under a unit trust structure which might not be as tax-efficient as offshore tax havens like the Cayman Islands. Other popular structures are domiciled in Luxembourg and Dublin.
Ms Indranee said the OEIC framework will create more good jobs in the broader professional services sector in Singapore. This includes accounting and administration, legal and compliance, custody and depository, marketing and distribution, and IT and system support.
"MAS will release more details in due course and continue to engage the industry and stakeholders," she said.
Industry players welcomed the move as a positive for the local fund management industry.
Nicholas Hadow, IMAS chairman, said OEICs are "flexible alternatives" to their well-established European counterparts.
Tony Lewis, head of HSBC securities services in Singapore, said a significant percentage of investments in collective investment schemes are in offshore funds.
The new OEIC framework will give fund manufacturers and distributors another option to domicile funds here, he said.
Singapore can be an attractive fund domicile location given its wealth hub status and existing ecosystem, he said.
"Singapore's strategically important location within ASEAN also means that future funds passporting schemes will provide Singapore-domiciled funds with additional and extensive distribution channels," he said.
Rodney Lim, Nikko Asset Management head of compliance for Asia ex-Japan, who is also IMAS regulatory committee chairman, said: "At the end of the day, the structure must be tax-efficient. The other thing to note is to make sure there's no loss of customer protection."
This article was first published on March 17, 2016.
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