Types of Investment Funds in Singapore
Updated on Tuesday 25th June 2024
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There are several ways through which a businessman can invest in a fund in Singapore. In the last years, numerous investment vehicles in Singapore have been incorporated as unit trusts and exchange-traded funds, but investors can also set up real estate investment trusts, which allow the opportunity to make investments in the real estate sector.
Those who are interested in how to start a fund in Singapore can also verify the legislation on alternative investment funds (AIFs). AIFs in Singapore have to be incorporated under a certain legal entity, such as a private limited company or a limited partnership and in this case, the legislation on commercial companies will apply as well (Companies Act).
Types of investment funds in Singapore
Investors interested in how to start an investment fund in Singapore must know that the first step in this direction is choosing the type of vehicle they want to operate it under. Here they are:
- mutual funds;
- equity funds;
- hedge funds;
- real estate investment funds or trusts, the so-called REITs;
- exchange traded funds.
Choosing the appropriate type of Singapore investment fund is also strongly connected to the investors addressed. They are divided into:
- professional/accredited investors;
- institutional investors;
- retail investors.
Singapore is one of the destinations in which investors can also create hedge fund startups. So, if you are interested in this option, our local affiliates can offer more information.
Common legal vehicles for investment funds in Singapore
There are two business forms usually employed to set up most types of Singapore funds. These are:
- the private limited liability company (LLC) and the variable capital company when using corporate structures;
- the limited partnership and the unit trust when using non-corporate forms;
The private company is a separate entity from members and managers, while the partnership does not have a separate legal personality which makes it more vulnerable to liabilities.
However, both types of fund structures have their advantages. If you need assistance in choosing one, our local specialists can advise you.
Common types of investments when setting up a fund in Singapore
Here is a brief list of the types of assets investment funds in Singapore usually invest in:
- shares in other companies, from which investors can obtain dividends and capital gains;
- bonds that are usually issued by the Singapore government, from which holders can generate interest income;
- units in trusts which imply investment in a diversified portfolio of assets chosen by the management company;
- real estate which is possible through REITs that trade on the Stock Exchange.
Some of these types of investments are also available in other jurisdictions, such as the Cayman Islands. However, compared to Singapore, there the Caymans segregated portfolio company is a preferred form for starting an investment fund.
Are there any residency requirements for Singapore AIFs?
The requirements on how to start an investment fund in Singapore that operates as an AIF stipulate that there are several residency obligations that have to be met by the fund’s representatives. Thus, if an AIF in Singapore is registered as a commercial company, then the company’s director must have his or her residency in this country and the following have to be met:
- the requirement must be met by at least one of the directors of the company;
- the residence requirement can be met if the person is a citizen of Singapore;
- however, a person can qualify as well if he or she is the holder of a permanent residence permit in Singapore;
- the residency requirement can also be fulfilled if the appointed director obtained an employment pass that was issued by the Ministry of Manpower in Singapore;
- if at least one of the directors meets the residency requirement, the other directors of the board can have their residency in any other jurisdiction.
Can an investor register a hedge fund in Singapore?
Yes, both local and foreign businessmen can register a hedge fund in Singapore. The manner in which one can start a hedge fund in Singapore is stipulated by the Code on Collective Investment Schemes, which prescribes that there are two types of hedge funds that are recognized by the local legislation, namely the onshore hedge funds (domestic funds) and offshore hedge funds (foreign funds). In this particular case, the following will apply:
- the procedures on how to start a hedge fund that is registered as a domestic vehicle are given by the Hedge Fund Guidelines;
- domestic hedge funds can be generally registered as trusts or companies;
- however, starting with 2009, investors also have the possibility of registering a domestic hedge fund as a limited partnership;
- this type of fund can be set up by qualified investors, a term which is defined by the applicable legislation;
- the fund has to be administered by a fund manager, who, as a general rule, most obtain a license from the Monetary Authority of Singapore;
- there is a licensing exemption and it is applicable to fund managers who operate with less than 30 investors (qualified investors);
- if the number of investors is higher, then the fund manager must apply for a Capital Markets Services License.
Licensing requirements
While investment funds in Singapore do not need specific licenses to operate, the management company does. The following licenses are available in this case:
- the capital market license;
- the financial advisor license.
Most Singapore fund managers require a capital market license when addressing professional, institutional, and retail investors.
Why should an investor choose Singapore for starting a fund?
Singapore is one of the leading financial markets of the world; the country has a highly competitive economy and a solid financial market, the financial sector being the country’s main field of investment. Investors who are considering to start a fund in Singapore must know that they can also register here mutual funds and the best options in this sense are the money markets funds, bond funds, or stock funds. According to data from the Singapore Statistics Office, the city-state’s portfolio investment assets was USD 2.264 billion at the end of June 2023. Most of the income was derived from:
- equity and shares in investment funds valued at USD 1.335 billion;
- long-term debt securities valued at USD 846 billion;
- short-term debt securities valued at USD 84 billion.
Investors who want to find out more information on other types of investment funds that can be registered in this country can address to our team of affiliates in Singapore. Our partners can provide consultancy services on how to start a hedge fund and can also represent investors in registering any of the investment vehicles available in this country.