Singapore proves to be attractive for hedge funds

n India-focused hedge fund during the second quarter of this year. The firm’s founder Kalpesh Kapadia who has been residing in California for the past 16 years plans to relocate to Singapore along with his family in order to manage the fund. According to Kapadia, “Due to its strategic location, infrastructure and ease of doing business, Singapore is becoming more and more of a regional hub for money managers. Given 3 billion people in the region and double-digit per capita income growth, this makes for a very fertile ground to mine for investment opportunities.”

Riding on Singapore’s advantages, other global hedge funds such as Algebris Investments, Prana Capital, Woodsford Capital and Fortress Investments have either already set up operations in the city-state or have expressed interest in Singapore company incorporation. At present, Singapore is reported to have the second largest hedge fund industry in Asia.

The country’s transparent yet flexible and light hedge fund regulatory environment is the key factor that is driving hedge funds to the city-state. The Monetary Authority of Singapore has recently done away with the licensing of representatives of financial advisory firms and boutique fund mangers have also been granted an exemption from holding a license. Of course there are a few more requirements now, in terms of capital and compliance, but it is still within people’s expectations and is not too complicated or demanding.

Setting up a hedge fund in Singapore also translates into considerable tax savings. Singapore’s personal income tax rates start at 0% and end at 20%, while its corporate income tax rate is 17%. Additionally, fund managers stand to benefit from industry-specific tax incentives. This places Singapore at a competitive advantage as compared to the UK and US. For instance, the increase in UK’s top personal income tax rate from 40% to 50% and its punitive 50% tax on bonuses in excess of £25,000 on employees of financial institutions has lowered UK’s appeal to financial institutions, including hedge funds.

The third attraction of setting up a hedge fund in Singapore is that the country is strategically located in Asia, which is currently witnessing rising wealth and strong economic growth. Moreover, Asian currencies are gaining importance in global trade. New York funds are reported to have moved 30% of their capital to Asia.

Hedge funds are subject to greater scrutiny and supervision in the West and this is seen as a push-factor that is driving them to more business friendly jurisdictions such as Singapore. According to Singapore-based consultancy, Eurekahedge, seven new hedge funds set up operations in Singapore during May and June last year. Singapore’s central bank’s figures show that Singapore’s hedge fund industry grew from $10billion in 2005 to $43billion in 2009. The number of hedge fund managers have also steadily grown from less than 20 before 2001 to 320 as of 2009.

Original Articles Sources
http://www.guidemesingapore.com/blog-post/singapore-business/singapore-proves-to-be-attractive-for-hedge-funds