Fund Management

Under the Securities and Futures Act (SFA), companies wishing to engage in the business of fund management in Singapore are either a licensed fund management company (LFMC) holding a Capital Markets Services (CMS) licence in fund management, or a registered fund management company (RFMC) with the Monetary Authority of Singapore (MAS). The business of fund management means that the company’s activities involve making investment decisions regarding a pool of money or assets, on behalf of customers.

Options to Set-up a Fund in Singapore

There are three possible legal forms for funds to be set up in Singapore – unit trusts, private limited companies or limited partnerships with each having its own advantages and disadvantages.

Funds as a Unit Trust

This is a popular choice for mutual funds and has the additional advantage of not being governed by the Singapore Companies Act. But the compliance cost may be higher as it is mandatory for unit trusts in Singapore to appoint a Licensed Collective Investment Scheme (CIS) Trustee.

Funds as a Private Limited Company (Pte Ltd)

This option is popular among private equity funds investing in Asia so as to take advantage of Singapore’s wide array of tax treaties with regions/countries across the world. Notably, the city-state’s cross-border tax treaties apply only to Pte Ltd.

A slight disadvantage is that Pte Ltd (referred to as company/companies henceforth) in Singapore has to be compliant with Singapore Companies Act and fulfill the following requirements at all times:

• Make annual filings to both ACRA (national registrar of companies) and IRAS (tax regulatory body).
• All subscriptions and redemptions from the fund are subject to the Companies Act. This means that whenever an investor invests in funds structured as a company via redeemable preference shares in Singapore, the details must be updated with ACRA and relevant resolutions prepared.

Moreover, as some information about companies in Singapore is publicly available, this will apply to the newly set-up funds, which may sometimes be undesirable.

Funds as a Limited Partnership

A popular choice worldwide and suitable to Singapore as well, with the only drawback being the fund not able to benefit from Singapore’s cross-border tax treaties. But the advantages are lesser compliance requirements (as these are governed by the Limited Partnership Act in Singapore and not by the Companies Act) and far less required public disclosure than companies.

Benefits of Establishing a Registered Fund Management Company in Singapore

In the changed economic paradigm of the world, Asia is where money is, and Singapore, with its financial infrastructure and strategic location, is ideally suited to be the continent’s financial hub. We summarise the advantages below.

 

• Competitive, transparent and efficient territorial low tax regime
• Extensive tax treaty network worldwide (currently over 76 full and eight limited treaties in place)
• No capital gains tax
• Several tax exemptions schemes such as 13R, 13X, and 13CA (detailed below) specifically for the fund management industry
• Benefits from various other tax incentives schemes available to all Singapore companies such as Corporate Tax Rebate, PIC etc.
• Strong regulatory environment and investor protection
• World’s best in ease in doing business (consecutive top ranking in World Bank surveys)
• Robust IP protection
• Efficient legal system
• English-educated local workforce
• Proximity to emerging markets of Asia
• Open-door immigration policy for foreign professionals
• Home to over 125 financial institutions, with five local banks rated among the world’s strongest

 

Requirements to Set Up a Fund Management Company (FMC)

MAS mandates that the category a corporation chooses accommodates its needs over a reasonable time frame. The different categories of FMCs available in Singapore are as below:

 

RFMCs

RFMCs pertain to those carrying on fund management business with no more than 30 qualified investors (of which no more than 15 may be funds or limited partnership fund structures) and the total value of the assets managed does not exceed S$250 million.

Qualified investors in Singapore include accredited investors, which are individuals whose net personal assets exceed S$2 million, or whose income in the preceding 12 months is not less than S$300,000; and corporations whose net assets exceed S$10 million.

The definition of qualified investors also includes collective investment schemes (offered in Singapore only to accredited investors) and closed-end funds (whose holders are accredited investors only).

 

LFMCs

There are two types of LFMCs:

• Retail LFMCs – carrying on fund management business with all types of investors.
• A/I LFMCs – carrying on fund management business with qualified investors only, with no restrictions on the numbers.