Singapore, a bustling financial hub in the heart of Southeast Asia, has become a magnet for global investors and entrepreneurs looking to expand their financial footprint in the region. Given its strategic location, robust regulatory framework, and conducive business environment, it’s no surprise that many choose to set up their fund management companies (FMC) here.
A Fund Management Company in Singapore is an entity regulated by the Monetary Authority of Singapore (MAS) and is tasked with managing investments on behalf of its clients. Whether catering to retail, accredited, or institutional investors, establishing an FMC in Singapore involves a series of regulatory and operational steps.
Through this guide, we will be covering the process of setting up a fund management company in Singapore. Furthermore, we will be explaining the requirements, benefits, and documentation to set up a fund management company in Singapore.
Requirements to Set Up a Fund Management Company (FMC) in Singapore
- Entity Setup: Before you delve into the specifics of the fund management sector, you need to incorporate a company in Singapore. This often involves reserving your company name, appointing directors, and securing the necessary capital.
- Experience: The Monetary Authority of Singapore (MAS) mandates that the directors and CEO of the FMC have relevant fund management experience, ensuring that the company is steered by competent professionals.
- Operational Capability: Your company should demonstrate adequate infrastructure, systems, and processes for risk and portfolio management, as well as continuous monitoring.
- Auditor Appointment: All FMCs need to appoint an external auditor for annual audits.
- Key Personnel: Fund managers should possess the requisite qualifications. This often includes having relevant industry certifications and passing specified exams.
Options to Set up a Fund in Singapore
1. Private Limited Company:
Shareholder Protection
In a private limited company in Singapore, the liability of a shareholder is limited, safeguarding shareholders’ assets.
Tax Benefits
Corporate tax rates are competitive.
2. Limited Partnership:
Flexible Profit Distribution
Profits can be divided based on agreements, not just ownership percentages.
No Double Taxation
Income is taxed on a partner-level basis rather than an entity-level basis.
Unit Trust:
Diverse Investment
Allows pooling of assets for investment in a diverse portfolio.
Professional Management
Managed by professional trustees ensuring expertise.
Variable Capital Company (VCC):
Sub-Funds Creation
Variable capital company in Singapore can create multiple sub-funds under one umbrella.
Operational Flexibility
Easier for fund redemption and issuance without affecting share capital.
Procedure to Set Up a Fund Management Company in Singapore
Setting up a fund management company (FMC) in Singapore involves various steps, both regulatory and operational. Singapore has established itself as a leading financial center in Asia, attracting a considerable number of asset managers and investment funds.
Here’s a simplified procedure to set up a fund management company in Singapore:
1. Determine the Type of License Needed:
- Registered Fund Management Company (RFMC): For FMCs that manage assets of not more than SGD 250 million.
- Licensed Fund Management Company (LFMC – A/I): For FMCs that manage assets for accredited and/or institutional investors without any limit on the amount.
- Licensed Fund Management Company (LFMC – Retail): For FMCs that manage assets for all types of investors, including retail.
2. Choose a Suitable Corporate Entity:
- Sole Proprietorship
- Partnership
- Limited Liability Partnership
- Private Limited Company (most common for FMCs)
3. Register the Business Entity with ACRA:
Register the chosen business entity with the Accounting and Corporate Regulatory Authority (ACRA) of Singapore.
4. Meet Minimum Capital Requirements:
- RFMC: The minimum capital requirements for RFMC is SGD 250,000
- LFMC: The minimum capital requirements for LFMC is SGD 500,000 or SGD 1 million (depending on specific conditions)
5. Secure Office Space:
FMCs must have a physical office in Singapore. OnDemand International experts can assist your in acquiring a virtual office in Singapore once you register your business with us.
6. Prepare the Required Documents:
- Business Profile
- Detailed business plan
- Compliance and internal audit arrangements
- Risk management policies
- Description of internal processes and IT systems
7. Apply for a License with MAS:
- Apply through the MAS online portal.
- MAS might request additional documents or clarifications. Once all the documentation is provided, you must wait for it to be processed. This can take several weeks to months.
8. Fulfill Continuous Requirements:
- Ongoing reporting obligations to MAS
- Renewal of licenses
- Adhere to Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) rules
- Conduct regular audits
Documentation Required to Set Up a Fund Management Company in Singapore
Proper documentation is the backbone of any application process, especially when aiming to set up a financial institution in a strictly regulated market like Singapore.
To ensure a smooth licensing process with the Monetary Authority of Singapore (MAS), consider the following:
- Business Plan: Outline your fund management company’s goals, objectives, and strategies. Highlight the types of funds you plan to manage, your target investors, expected fund size, and projected financial growth.
- Compliance Manual: A detailed manual showcasing your company’s dedication to following all legal standards. This should include policies for Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT).
- Risk Management Procedures: Describe how your business plans to recognize, evaluate, keep track of, and manage risks related to its operations. This includes market risks, liquidity risks, operational risks, and credit risks.
- Internal Audit Processes: Clearly outline the periodic internal checks that your company plans to implement, ensuring continuous compliance and identifying areas of improvement.
Advantages of Setting up a Singapore Fund Management Company
Establishing a Fund Management Company (FMC) in Singapore offers a plethora of advantages, stemming from the nation’s robust economic infrastructure, regulatory framework, and strategic location. Here are some of the most compelling benefits:
Robust Regulatory Framework:
The Monetary Authority of Singapore (MAS) offers a clear and transparent regulatory environment, ensuring that operations meet international standards and fostering trust among investors.
Strategic Geographic Location:
Situated at the crossroads of major trading routes, Singapore serves as a gateway to the rapidly growing ASEAN economies and broader Asian markets.
Tax Incentives:
Singapore offers several tax incentives for FMCs, such as the Financial Sector Incentive (FSI) scheme, which can provide reduced tax rates for qualifying fund management activities.
Reputable Financial Hub:
Singapore is consistently ranked among the world’s top financial centers. Its reputation ensures a conducive environment for fund managers to attract international investors.
Skilled Workforce:
With world-class educational institutions and a commitment to professional development, Singapore boasts a pool of skilled professionals in the finance and related sectors.
Advanced Infrastructure:
Modern office spaces, state-of-the-art technology, and excellent connectivity make Singapore a preferred destination for businesses looking for a seamless operational environment.
Registration and Licensing Requirements
Registered Fund Management Companies (RFMC):
- Asset Limit: Can manage assets up to SGD 250 million.
- Investor Limit: Restricted to a total of 15 funds and 30 eligible investors.
- Notification: Notify MAS before commencement, with minimal regulatory reporting.
Licensed Fund Management Companies (LFMC):
- No Asset Ceiling: Can manage assets exceeding SGD 250 million.
- Retail Investors: This can cater to retail investors, but this demands stricter regulations.
- Compliance: Adherence to capital adequacy, business conduct, and regular audits is mandatory.
Both categories also require AML & CFT measures in place.
Conclusion
Singapore’s reputation as a leading financial center is well-deserved, with its transparent regulatory environment, strategic location, and vibrant financial ecosystem. Establishing a fund management company in Singapore presents a unique opportunity for financial professionals to tap into the thriving Asian markets. While the journey of setting up an FMC can be intricate, with the right guidance and understanding of the regulatory landscape, the rewards can be substantial.
You can speak with experts from OnDemand International if you wish to set up a fund management company in Singapore. Our team of seasoned experts is dedicated to providing comprehensive support throughout the entire process, from initial setup to the completion of all necessary documentation.
