• Industry: Financial Services
  • Type: Business and industry issue
  • Date: 5/2/2012

The Changing Regulatory & Tax Environment for Exempt Fund Managers in Singapore  

A Survey of Industry Views

In December last year, KPMG surveyed a group of EFMs in Singapore to gauge their awareness of the proposed regulatory changes and their readiness to comply with them. We also questioned participants about their awareness of and involvement in the wide array of tax incentives and concessions offered by the Singapore Government, and identified key commercial considerations affecting the EFM industry in Singapore in this survey.

Five key themes emerged from our findings that could have implications for the fund management industry in Singapore.

  1. Most EFMs believe that it will be challenging to implement the new proposed regulatory framework and have cited risk and compliance as a key challenge. We believe that the proposed changes could lead fund managers to re-examine current risk and compliance strategies as they strive to maximise operational and economic efficiency.
  2. The study found that EFMs are facing resource constraints and experiencing difficulties in attracting qualified staff to address compliance and fund-raising issues. They are also experiencing increased costs resulting from recent regulatory changes and pressure from investors about due diligence requirements. Perhaps as a consequence, the minimum Assets Under Management (AUM) thresholds required to breakeven are also continuing to rise.
  3. Many EFMs have indicated that they will engage external support to help them with the compliance-related activities associated with the new regulatory framework. This, we believe, is likely to spur the development of a new vendor ecosystem focused on assisting EFMs with these activities.
  4. Our survey also indicates that client reporting standards, including the frequency, content, investment insights and timeliness, are an area of strength for the fund managers. This high level of reporting may be the result of investors requesting more transparent and regular communication as a means of risk and performance management. Some managers are using the enhanced regulations as a basis for reinforcing investor due diligence requirements.
  5. Finally, although fund managers are generally aware that they are eligible for tax incentives and concessions from the Singapore Government, the vast majority of EFMs as of now have not applied for them. In our view, if more effectively promoted, these incentives and concessions could take on a new attractiveness as fund managers look for ways to offset higher costs associated with the new regulatory framework and the generally rising costs of doing business in Singapore.