Singapore OEICs – a significant boost to Singapore's fund management industry

This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.

Summary and implications

Singapore's Senior Minister of State for Law and Finance, Indranee Rajah, has announced that Singapore's financial regulator, the Monetary Authority of Singapore (MAS) is working to introduce a new regulatory framework for open-ended investment companies (OEICs).

The announcement is a welcome and long-sought development for the Singapore fund management industry and is intended to encourage more fund managers to domicile their funds in Singapore.

The size of the city-state's fund management business has grown significantly over the past five years, with Singapore's AUM (assets under management) reaching S$2.3tn as at the end of 2014 (a 30% increase from the previous year alone) and the number of licensed or registered fund management companies increasing nearly six-fold between 2010 and 2015 (currently 600+).

However, the AUM figures include AUM of funds domiciled offshore and, although the MAS has taken positive steps to encourage more managers to domicile their funds here (for example, the Enhanced Tier Fund regime), the lack of a fund-oriented investment vehicle has long been cited by the funds industry as a brake on Singapore's ambitions to cement itself as a global asset management centre.

The introduction of the OEIC framework should provide a flexible corporate alternative to the Singapore unit trust structure that has to date been the main fund vehicle used for Singapore-domiciled funds. OEICs will accommodate umbrella-fund structures and, as corporate vehicles, the Singapore OEICs should also be able to benefit from Singapore's long list of tax treaties.

The MAS announcement comes hot on the heels of the announcement in January 2016 that Hong Kong proposes to implement legislation to allow for the establishment of open-ended fund companies (OFCs).

The Hong Kong proposals are set out in The Securities and Futures (Amendment) Bill (the Bill) 2016 and follow on from a public consultation conducted in 2014. The Singapore announcement provides fewer details about the OEICs than as are provided for OFCs in the Bill, but MAS has indicated that the OEIC legislation should be enacted within 12 months.