Types of Investment Funds in Singapore

Updated on Thursday 29th August 2019

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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 were 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 the private limited company or the limited partnership and in this case, the legislation on commercial companies will apply as well (Companies Act). 
 

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
     

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. The available data on investments in Singapore shows the following:
 
  • the level of foreign direct investments in Singapore in 2013 stood at S$906 billion;
  • in 2017, it expanded at S$1,568 billion, marking an increase of 15.7% compared to the results of the previous year;
  • in 2017, 90.2% of the foreign direct investments in Singapore took the form of direct equity investments;
  • direct equity investments in Singapore accounted for S$1,414 billion in 2017;
  • the top investor in Singapore in 2017 was the United States of America, which invested a total of S$339 billion;
  • the financial and insurance services sectors were the most important fields of investment, accounting for S$669 billion in 2016;
  • in 2017, the same sector was the preferred investment field, increasing at S$854 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.