Singapore’s asset management industry posts higher growth rate than global average

SINGAPORE – Singapore’s asset management industry grew at a quicker pace than the global average in 2021, aided by a strong pipeline of new funds seeking investment opportunities in the Asia-Pacific.

Assets under management (AUM) here expanded by 16 per cent from a year earlier to US$4 trillion (S$5.7 trillion), according to the Singapore Asset Management Survey 2021.

The annual survey published by the Monetary Authority of Singapore (MAS) showed that global AUM grew by 12 per cent to US$112 trillion.

“Singapore continues to serve as a global gateway for asset managers and investors to tap the region’s growth opportunities,” said MAS. It noted that last year, 78 per cent of AUM originated from outside the Republic, and 90 per cent of the total was invested in assets outside Singapore.

However, last year’s growth in AUM here was a tad behind the 17 per cent expansion in 2020.

Singapore saw continued interest from players seeking to expand their Asia presence, with the number of licensed and registered fund management companies rising by 15 per cent – from 962 in December 2020 to 1,108 in December 2021.

The sector is supported or advised by over 220 service providers, such as lawyers, tax advisers and fund administrators. Singapore’s financial sector accounts for about 6 per cent of the total workforce.

The majority of AUM growth during the year came from new net inflows that stood at $448 billion, or 58.9 per cent of the year-on-year increase. Valuation gains made up the remaining increase in AUM.

MAS said full year AUM growth in 2022 is expected to moderate as investors turn cautious amid geopolitical and macroeconomic risks.

Still, global and regional asset managers may continue to tap Singapore’s strong network of private wealth managers, family offices and institutional asset owners, as well as investment opportunities in Asia.

MAS said: “With Singapore’s vibrant asset management ecosystem, we will continue to play an important role in serving and intermediating international investors and capital flows, to support Asia’s growth and net-zero transition needs.”

The survey showed managed assets with environmental, social and governance (ESG) targets grew by 77 per cent year-on-year to make up 58 per cent of total AUM. The number of asset managers offering ESG strategies increased to 279 from 240 in 2020.

Discretionary AUM, which are run by portfolio managers on behalf of their clients, made up 52 per cent of total AUM in 2021. MAS said this is in line with the trend of asset managers basing their key investment professionals and decision makers in Singapore.

Meanwhile, the traditional retail segment – where funds collect investments from individuals – stood at $134 billion, representing a five-year compound annual growth rate of 10 per cent.

The alternatives sector – which encapsulates financial assets that do not fit into the conventional equities or bonds categories – continues to be a key driver of AUM growth, expanding 30 per cent year-on-year to $1.23 trillion.

Within the alternatives sector, private equity AUM growth came at 42 per cent and venture capital at 48 per cent.

Private equity and venture capital firms invest in companies with a view of selling their stakes at a profit later.

Private equity managers reported $90 billion and venture capital managers reported $5 billion of capital as dry powder – which refers to capital that is contractually committed but undrawn.

Following the Variable Capital Companies (VCC) Act, which took effect in January 2020, the number of new VCCs continues to grow.

VCCs are a new corporate structure for investment funds, offering benefits such as flexibility in issuance and redemption of shares. Dividends can be paid out of capital, which gives fund managers leeway to meet obligations.

As at Oct 14 this year, more than 660 VCCs have been incorporated or redomiciled in Singapore. These umbrella or standalone VCCs, representing over 1,300 sub-funds, are run by 420 regulated fund management companies.