SINGAPORE -- Singapore is luring Western money managers with mandates from the government, but its objective is to become a Hong Kong -style region al financial center.
Money managers are jockeying for position as Singapore's government doles out mandates from three distinct pools of money, each of which potentially totals in the tens of billions of dollars.
Each pool of money is closely linked to the central government, which is using its control to lure managers to set up or expand operations in Singapore. The intent, government officials said, is to make Singapore a financial center in the region.
The most defined pool, and most currently on the minds of managers, is S$35 billion (U.S.$21 billion) in government reserves and other federal money that will be distributed to outside managers over the next couple of years. Those assets are controlled by two large central government bodies, the Government Investment Corp., which is essentially the central government's investment manager; and the Monetary Authority of Singapore, the de facto central bank.
All dollar figures are in Singapore dollars.
About $7 billion of that already has been given to managers, sources estimated. Government officials do not comment on who wins the mandates.
Money manager sources pegged the Government Investment Corp. as having about $130 billion in assets under management. Government officials do not comment on the sizes of the agencies.
The monetary authority, meanwhile, is close to wrapping up searches for global fixed-income managers to run government reserve money.
Those mandates will likely total in the hundreds of millions, said Teo Swee Lian, executive director with the authority's financial sector promotion depart- ment. She would not give other details of the mandates.
Towers Perrin is the consultant on the searches and has created in-house benchmarks for the monetary authority.
Money manager sources said the agency will conduct global equity searches this year.
The second pool of potential
business could be as much as $50 billion now in the hands of dozens of government-linked corporations, public authorities and statutory boards such as the Maritime Port Authority and the Singapore Tourism Board. Many of these agencies are sitting on short-term cash surpluses, observers said.
And the third market, retail unit trusts or mutual funds, promises to be lucrative because fees average 100 basis points. The market includes pension money from the government's 45-year-old $85 billion Central Provident Fund, a mandatory savings plan for workers.
The government estimates that as much as $25 billion of the CPF is sitting in short-term accounts that could be channeled into unit trusts earmarked for retirement, said Ronald Chong, spokesman for the Central Provident Fund Board.
The retail unit trust market was $3.3 billion at the end of 1998, according to government officials. Managers estimated that unit trust assets close to doubled last year.
Only a small slice of CPF members' money, about $400 million, is now invested in unit trusts. Managers said the CPF unit trust market could grow as much as 25% in a year.
As far as the monetary authority is concerned, the $35 billion in mandates from it and the Government Investment Corp. is "seed money" for managers willing to commit resources to Singapore, its executives said. They want firms, for example, to move investment professionals to Singapore and train locals.
The government wants managers to run a variety of accounts -- not just local or government money -- from Singapore and "is trying to bring in more managers with different skill sets," Ms. Teo said.
Those managers would have "not just Asian equity, but global emerging markets and currency overlay and also fixed-income expertise," she said.
Recent arrivals specializing in fixed income include Pacific Investment Management Co. and AXA Group, each of which has been in Singapore less than two years, she said.
Managers are clearly responding to the government's call.
Templeton Asset Management Ltd., for example, close to six months ago expanded its operations in Singapore to include global fixed income and global equity accounts. Its emerging markets
equity team long been has based in the country. The firm runs $15 billion from Singapore, with $500 million of that in local retail funds.
Rothschild Asset Management (Singapore) Ltd. is now the center for the firm's Asian equity operations. About a year ago, the firm closed its Hong Kong operations. "Here, the environment is extremely favorable to the development of business," said Jill Smith, managing director. On top of the government incentives, she said, favorable factors included the ease of getting staff and the country's geographical location.
Rothschild runs $1.7 billion from Singapore. Eighty percent is institutional, with the rest in retail funds.
Money management, of course, is not new in Singapore. There are a host of players, some with decades on the ground, and others with months.
There are close to 190 money managers in Singapore. "That's staggering for the amount of money" in the market, said C.Y. Foo, a consultant with Watson Wyatt Singapore Pte. Ltd. "Most of the major players are here, except for Fidelity."
On top of government money, Singapore has offered managers tax incentives as a sweetener. Those that run more than $1 billion get a 16 percentage point break on the 26% tax rate on fees earned on foreign funds. And firms that run $5 billion or more can apply for a holiday of five to 10 years in which they pay no taxes on fees.
Ms. Teo said the firms that have so far won that holiday are: Morgan Stanley Dean Witter Asia (Singapore) Pte.; Schroder Investment Management (Singapore) Ltd.; Templeton; and Merrill Lynch Mercury Asset Management (Asia Pacific). Other managers are at that level but have not applied, she said.
Singapore's institutions often look to foreign managers to run global and U.S. portfolios in both stocks and bonds.
"The Asian crisis has taught a couple of lessons to investors here, both retail and institutional," said Michael H.C. Khoo, managing director, Alliance Capital Management (Singapore) Ltd., which has been up and running since 1994 and manages close to $4 billion in assets from Singapore.
"Before the crisis, investors thought Asia could not fail." In the wake of the Asian crisis, Mr. Khoo said, investors' "increasing response was to use investment managers" and start to invest abroad.
Alliance's office in Singapore is the hub for its Asia emerging markets equity investing, with Tokyo as the center for investing in developed Asia.
Managers said that part of the development of the money management industry in Singapore rests with the statutory boards and government-linked corporations that hire managers to run short-term cash reserves.
Managers are expecting to see more of these cash-rich organizations
"looking at what they've done historically and hiring consultants. That's just starting," said Norman Boersma, executive vice president, global equity management, with Templeton.
Fees are often an issue in negotiating with the statutory boards, which often hire managers for mandates simply because they charge the lowest fees, managers said.
They are hiring consultants and making decisions about asset allocation -- a first. In the past, the statutory boards and government-related corporations had used the Government Investment Corp.'s consulting operations.