As investors increasingly turn to fund managers and capital markets services to handle their portfolios, the demand for fund management companies is on the rise. Investors pool their money through collective investment schemes, and fund managers make strategic decisions to achieve optimal returns on these investments.
Setting up a fund management company in Singapore is a critical first step in entering the asset management industry. This guide outlines the requirements and regulations for starting and operating a fund management company in Singapore.
Why Singapore?
Over the past decade, Singapore has become a key center for fund management in Asia, bolstered by its economic growth and increased investments from Western countries. The country’s favorable tax environment enhances its appeal, offering some of the most attractive tax incentives for businesses and investors.
How to Open a Fund Management Company
Opening a fund management company in Singapore can be highly rewarding, especially when catering to institutional and high-net-worth individual investors. Whether your focus is on mutual funds or hedge funds, adhering to the correct incorporation processes is essential for successful management.
Overview of the Asset Management Industry in Singapore
Following the 2008 financial crisis, the Singapore government took significant steps to strengthen its fund management regulatory framework. In 2010, the Monetary Authority of Singapore (MAS) released a consultation paper that led to a restructured regulatory regime effective from August 2012.
Under the revised framework, fund management companies (FMCs) are categorized into three types based on their business nature and scale:
Registered Fund Management Company (RFMC):
Can manage funds for all types of investors.
Total assets under management must be less than S$250 million.
Limited to serving no more than 30 qualified investors.
Licensed Fund Management Company (LFMC):
Can only conduct business with institutional or accredited investors.
Total assets under management can exceed S$250 million.
Retail Fund Management Company (Retail FMC):
Can manage funds for all types of investors.
Total assets under management can exceed S$250 million.
Registration and Licensing Requirements
1. Competency Requirements
Key Personnel: The company must meet minimum competency standards for all key personnel. Directors, representatives, and shareholders must be deemed fit and proper by MAS. For instance, a venture capital fund manager needs a Capital Markets Services (CMS) license to operate investment funds.
Directors: At least two directors must have over five years of relevant experience. Nominee directors are not acceptable. For retail FMCs, the CEO should have a minimum of ten years of experience.
Full-Time Representatives: Retail FMCs must employ at least three full-time representatives residing in Singapore to handle regulated activities such as portfolio management, advisory, client servicing, and business development.
2. Capital Requirements
Collective Investment Scheme Management: S$1,000,000
Non-CIS Fund Management: S$500,000
Other Activities: S$250,000
3. Compliance Arrangements
General Requirements: All FMCs must establish sufficient compliance arrangements aligned with the complexity, nature, and scale of their operations. Directors and the CEO are responsible for regulatory and compliance matters.
Regulatory Framework: FMCs must adhere to the Securities and Futures Act, which regulates the securities and derivatives industry. Specific compliance requirements vary by FMC type:
RFMC: Requires a compliance individual, which can be the senior staff or CEO.
Retail FMC: Compliance functions must be independent of portfolio management and conducted by qualified personnel.
Licensed A/I LFMC: Must designate a senior employee independent from its front office for compliance oversight.
4. Risk Management Requirements
Fund management companies must implement a robust risk management framework to identify, monitor, and address risks related to client assets. This framework should be overseen by senior management and the board of directors, with appropriate metrics and tools for accurate risk assessment.
5. Auditing Requirements
FMCs are subject to internal audits, which can be performed by an internal function or an external service provider. The Monetary Authority of Singapore may require companies to appoint new auditors if the existing ones are deemed unsuitable, depending on the business’s complexity and scale.
Investing in Corporate Services
For a seamless incorporation process and expert support in setting up your fund management company, consider partnering with us at WealthBridge. We offer comprehensive corporate solutions to meet your needs, allowing you to focus on your core business activities.
For more information or to get started, contact us at info@mvgtrust.com.
