Singapore Regs Could Squeeze Out Smaller Hedge Funds

Dec 2 2011 | 9:41am ET

Singapore, long known and loved by hedge fund managers for its light-touch regulatory approach, is bringing its regime in line with most other hedge fund centers. And that move could imperil its effort to rival Hong Kong as Asia's alternative investments capital, one consultancy warns.

The Monetary Authority of Singapore is set to require all hedge funds in the city-state to register and have independent auditors. In addition, the largest, those with more than S$250 million in assets, will have to get a license from the regulator, and all funds will have to set up risk management systems and employ at least two investment professionals.

Those requirements could lead to a 15% attrition rate among Singapore's roughly 400 hedge funds, many of which are not especially healthy to begin with.

"You will get an initial wave of consolidation when people realize that they are just not going to make it," GFIA's Peter Douglas told Reuters. As it stands, more than 40% of Singapore's hedge funds have less than the US$30 million in assets they need to be commercially viable, Douglas said.

The new regulations will impose some very high costs on those managers—a risk-management system could run at least US$25,000 per year, to say nothing of the need to hire additional staff and an outside auditor—already struggling with increased costs that include a 38% increase in office rents in the city.

"For the famous guys, it's not such an issue as they raise a lot of money at the beginning, but for the not-so-famous ones, it’s a big struggle," one manager told Reuters. "My costs have gone way up. If they get unmanageable then I will have to move or shut down."

Not everyone sees the new regulations are a stranglehold on smaller managers. Some argue that MAS registration will be a selling point to fraud-wary institutional investors.

"Now managers can say to the market they are registered by the MAS, which exempt managers under the old regime couldn't do," Han Ming Ho, who leads Clifford Chance's fund practice in Singapore, said.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.