Last updated January 2024
Staying in the loop about fund administration trends is crucial for every fund administrator because they are responsible for managing and balancing the portfolios of many investors. Here are five fund administration trends fund managers should know about the fund industry today and how Singapore corporate taxes work:
Singapore is One of the Most Preferred Hub
Singapore has placed itself as one of the leading financial hubs globally, as evidenced by Singapore’s burgeoning “Assets Under Management” (AUM). In 2020, its AUM grew 17% to reach S$4.7 trillion. The year before, AUM grew by 15.6%, signifying investors’ keenness to keep their assets in the country. Singapore has also taken the lead in the Asia/Pacific region and secured the third position worldwide in the Global Financial Centre Index 2022 released last September 2023.
This investor preference should come as no surprise, given Singapore’s stable and supportive government for business and investing. This can be seen by its tax-friendly regulations and the ease of establishing one’s business footprint here, a sentiment that the World Bank supports via its “Ease of Doing Business Index“.
In 2022, a significant 76% of Singapore’s AUM came from international sources, while 88% of the funds were invested in assets outside the country. Discretionary AUM accounted for more than half, precisely 52%, of the total AUM in 2022.
The Variable Capital Company (VCC) Structure
The Monetary Authority of Singapore (MAS) launched this new corporate structure in January 2020 that aims to make the investment process more flexible for investors and help save money for both investors and fund managers. Unlike a company that’s used to carry out a business, the sole purpose of a Variable Capital Company (VCC) is to create one or more collective investment schemes (CIS) in the form of a corporation. The investment can include either open-end or closed-end funds.
During its first year alone, there were approximately 200 entities registered under this new structure, revealing the popularity of the VCC Act. By the end of 2022, 969 entities have been incorporated or re-domiciled in Singapore under this structure.
The enthusiasm surrounding the VCC Act is further fueled by the VCC Grant Scheme, where the government covers up to 70% of eligible expenses for the first three years of fund companies operating in Singapore. Each application is capped at S$150,000, with a maximum of three VCCs per fund manager.
The VCC Grant scheme has been extended for an additional two years until January 15, 2025, with changes effective from January 16, 2023. Under the extended scheme, the Financial Sector Development Fund (FSDF) will co-fund 30% of eligible expenses paid to service providers based in Singapore, with a maximum grant cap of S$30,000 per application. This scheme is available to First-time Qualifying Fund Managers who have incorporated a VCC and have obtained a Notice of Incorporation or Notice of Transfer of Registration from the Accounting and Corporate Regulatory Authority (ACRA). The objective of the extended scheme is to further bolster the adoption of VCCs in Singapore.
Additionally, VCCs can benefit from various tax incentives, such as those under Section 13R (Singapore Resident Fund) and Section 13X (Enhanced Tier Fund). These incentives ensure that there is no taxable income from gains or income derived from VCC investments, maximizing returns for both investors and fund managers. Furthermore, VCCs offer flexibility in issuing and redeeming shares without requiring shareholders’ approval, providing investors with the freedom to exit whenever they choose.
The Growth of ESG Investing
Climate change, global warming, and sustainability have become increasingly prominent topics as people grow more environmentally conscious. This surge in awareness, fueled by notable events like COP26, has also influenced investment practices. Ethical investing, often referred to as ESG (Ethical, Government, and Social) investing, is gaining traction, evident from its remarkable growth of 53% as of 2021, with managed assets globally amounting to a staggering $2.7 trillion.
In 2021, MAS announced plans to invest an estimated US$1.8 billion into climate-related investment opportunities. With such a goal, MAS became the first central bank in Asia and the second in the world to publish a standalone sustainability report. Moreover, it also follows the trend where 80% of Singapore’s fund managers have signed the UN’s Principles for Responsible Investments.
The transition towards a more sustainable approach has proven beneficial for investors. During the initial impact of the COVID-19 pandemic, ESG-focused companies outperformed those that didn’t. Furthermore, the MAS Asset Management Survey Report 2022 revealed that 55% of Singapore’s AUM employs an ESG overlay, with 281 asset managers offering ESG strategies.
On March 31st, 2022, MAS revised its Singapore Stewardship Principles (SSP), a set of guidelines aimed at institutional investors. The revised SSP emphasises promoting responsible allocation, management, and oversight of capital to create long-term sustainable value for shareholders, while also considering ESG factors.
Digitalisation
The pandemic has highlighted the importance of going digital for all industries, including the fund management industry. Doing so ensures one’s business thrives and adapts to customers’ needs in the digital era. Digitalisation can be implemented in various areas of fund management, ranging from know-your-customer (KYC) regulations to processes and operations.
Going digital means embracing technology in your workflows, such as using video conferencing solutions to conduct KYC policies or leveraging robotics and automation for manual processes, like the cash and stock reconciliation process. Digitisation will increase efficiency and productivity, meaning employees can focus on meaningful tasks, like growing the fund, instead of doing repetitive work. Not to mention, it also diminishes the possibility of human errors and also saves cost and time for the business itself.
The fund management industry is not a constant landscape. It’s continuously evolving with the changing times. Fund managers must stay abreast of the latest trends and regulatory changes in the field to effectively serve their expanding customer base.
Lanturn’s Fund Services
As one of the leading one-stop digital hubs for corporate and fund services, Lanturn has a proven track record in fulfilling every client’s needs. At Lanturn, we unlock the potential of your venture capital by offering unparalleled fund formation and administration services. Our seasoned team of professionals is well-versed in fund structuring and can guide you seamlessly through the process of securing MAS licenses.
When it comes to fund administration services in Singapore, Lanturn stands out. We are committed to providing transparent, consistent, and comprehensive services to the fund management industry. Our expert offerings include bank reconciliation, capital calls, financial statement distribution, audit support, fund taxes, and capital accounts balance tracking among others. Lanturn also offers comprehensive KYC and AML checks for businesses, asset managers and investors.
Ready to embark on a journey towards financial success? Contact us today and let Lanturn be your partner in reaching your goals.
