Singapore is fast becoming a hot fund management center in Asia and viable alternative to Hong Kong, the region's current capital of fund management.
Some managers even see Singapore surpassing Hong Kong after the turn of the century as the region's top fund management center.
"(The Association of South East Asian Nations) is really the growth part of the world - growth in capital markets, privatizations and investment opportunities," said Warwick Negus, vice president of the asset management division of Goldman Sachs (Singapore) Pte. And within Southeast Asia, Singapore is "the best location" for doing business, he maintains.
Now, Singapore is largely viewed as No. 2 in Asia outside of Japan. And some experts say that while the Singaporean government isn't yet striving to outpace Hong Kong, it is wooing fund managers to create a fund management center that will support its overall financial services activities.
In 1995, for example, the Monetary Authority of Singapore approved 15 more money management firms for favorable tax treatment (a 10% tax rate on income from assets managed for offshore clients), bringing the total to 103 approved fund managers. In early 1996, another six managers were awaiting approval.
At the end of 1994, the most recent data available, Singaporean managers handled a total of $66 billion Singapore dollars (about U.S. $46.8). Firms that have come to Singapore recently include Goldman Sachs, which left Hong Kong in October; Henderson Administration PLC, which opened its first Asian office outside in Singapore late last year; Murray Johnstone Ltd.; Alliance Capital Management LP, which opened an office in 1994; and Fischer Francis Trees & Watts, which established an office last year.
Sean Dranfield, business development director of Henderson International in London, cited several reasons for the selection of Singapore. "First, we didn't see the need to take on the risk of 1997 in Hong Kong," when the British territory reverts to Chinese sovereignty. In addition, Singapore has been growing as a financial center and attracting a number of the firm's competitors. "The other thing we like about Singapore is that the labor force was, in our view, much more stable and as well, if not better, educated in financial terms than in Hong Kong."
Hong Kong's fund management industry is still strong. According to Hong Kong's Securities and Futures Commission, 566 corporations were registered at the end of 1995 as investment advisers - although some firms might be providing services such as research and analysis, not necessarily portfolio management.
The commission did not have a count on the number of portfolio managers and did not supply data on assets under management by investment advisers. But the Hong Kong government's finance department reported Hong Kong had 87 registered fund management companies and 1,183 authorized unit trusts and mutual funds at the end of 1995.
In a 1995 survey of its members, the Hong Kong Investment Funds Association found 43 respondents of 47 member firms managed U.S. $85.7 billion. But Singapore, whose attractions include a well-developed infrastructure, strong sense of law and order and existing financial base, has been intensifying its bid to lure fund managers.
In addition to existing tax incentives, Senior Minister Lee Kuan Yew upped the ante in September 1994 by unveiling important new financial incentives. For fund managers, the most significant was the announcement that by the year 2000, up to $80 billion Singapore dollars would be available for investment managers operating in Singapore.
The government had awarded assignments to fund managers before. But it was the much larger size of the allocations being discussed in 1994 that caught managers' eyes. Besides those institutional assets, Singapore is also more attractive to private clients because of 1997 concerns.
But Singapore also has something else that managers find attractive: a location in the heart of Southeast Asia.
What's more, Singapore's government already has come through on some of its promised incentives. Late last year, Ng Kok Song, deputy managing director of the Government of Singapore Investment Corp., announced the GIC hired 18 Singapore-based external fund managers with mandates to invest in Asian stock markets. The names of the managers could not be learned. The total allocation was roughly U.S. $1 billion. And possibly another U.S. $500 million may be farmed out to managers in Singapore, Mr. Ng told Pensions & Investments.
He said that over the next three to five years, possibly "several billion dollars" could be made available, preferably to managers in Singapore for investing globally.
Despite the interest in Singapore, managers in Hong Kong aren't racing to the exits. In its 1995 survey of members, the HKIFA found a high degree of local loyalty. Among survey respondents, 86% or 37 firms said they use Hong Kong as their Asia-Pacific headquarters. Of those based in Hong Kong, only 3% said they would move to another jurisdiction within the next three years and another 11% said a move was possible.
To A. Grahame Stott, regional director, Asia-Pacific for Watson Wyatt Worldwide in Hong Kong, "Singapore's advantage over Hong Kong is a short-term thing." While operational costs in Singapore have become more comparable to Hong Kong's, business opportunities in Hong Kong should look enticing once China loosens its now-tight monetary controls, he said.
But increasingly the issue isn't Hong Kong vs. Singapore, observers say. As regional opportunities swell, the perspective has expanded to the point where "very few people are saying we need to be in one location. The idea is now that we'll be in Singapore or Hong Kong today and in three years we'll be in the other location as well," Mr. Stott said.
