The article provides a comprehensive guide to starting a hedge fund in Singapore, including regulatory requirements and processes.

As the economy of Singapore grows dynamically, investors are attracted to explore the opportunities and invest their money here. As a result, we can expect the hedge fund industry to perform well in the country.

Singapore is competing alongside with Hong Kong, to become the top location that connects fund managers with asset owners who are looking for companies to assist with portfolio management. Various factors such as transparency, ease of doing business, availability of talents can help Singapore to leapfrog Hong Kong as the most competitive financial hub.

The main intention behind setting up a hedge fund is its concept of ‘absolute return’. Hence, strong wealth growth, a large pool of high net worth individuals and well-functioning infrastructure can create a perfect environment to grow Singapore’s hedge fund industry.

What is a Hedge Fund?

A hedge fund is set up with the purpose of getting good returns despite fluctuation of capital markets. The Monetary Authority of Singapore (MAS) describes various investing and funding steps of Singapore along with Collective Investment Schemes. MAS has set out two main criteria in defining a Hedge Fund:

  1. Adoption of arbitrage, leverage, derivatives, and short selling strategies.
  2. Investment that involves non-mainstream assets such as cash, bonds, equity, etc…

There are two types of Hedge Funds:

  • Onshore Funds: Regulated under the jurisdiction of the Singapore licensing and regulatory regime.
  • Offshore Funds: Regulated under the jurisdiction of offshore legislation on account of their constitution outside the country.

Process of Starting a Hedge Fund.

Starting a hedge fund requires streamlined licensing and subjects to tax regulatory measures. To start an onshore hedge fund, a fund manager needs to fulfill the following requirements:

  • Licensing

The license requirements for hedge funds vary according to the numbers of investors. Small funds with less than 30 investors can operate without a license. Larger size funds with more than 30 investors need to hold one license. It can be a Capital Market Services License under the Securities and Futures Act (SFA) or Financial Advisers License under the Financial Advisors Act (FAA), depending on the nature of business.

  • Tax Operations

There are certain exemptions credited to both types of hedge funds. Offshore funds are exempted from paying any Singaporean tax on their ‘specified income’ if the fund falls under the category of ‘qualifying fund’. Similarly, the onshore funds that fulfill the conditions set up by MAS can enjoy the tax exemption benefits through the Singaporean Resident Fund Scheme.

Enhanced Tier Fund Management Scheme

Enhanced Tier Fund Management Scheme has been introduced to lift the restriction on investors’ residency. In addition, when a fund manager markets the onshore or offshore funds to an accredited investor or an institutional investor, they do not need to submit prospectus or any other supporting document to the MAS.

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Processing Time for the License

If your application is completed with no missing document, the MAS will take around 4 months to review and process the application. In cases where additional documents are required or submission pack is incomplete, we will need to expect a longer time for MAS to process.

Conclusion

Starting a CMS company in Singapore can be a challenging task due to various admission criteria, ongoing requirements and complicated processes. Also, passing the inspections and assessment of the MAS is never an easy task. That’s where Hub comes into action. We assist you in filling in the forms and guide you through in setting out the best possible business plans for assessment. Now, you can forget the hassle of filling forms and waiting, let us work while you can sit back and relax.

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