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Alternatives drives Singapore asset growth

AUM in the Lion City grew at a double digit rate in 2020, thanks to the strong demand for private equity and real estate funds.

Singapore had a “bustling year” in 2020, with the total assets managed by Singapore-based asset managers increasing by S$700bn ($516.8bn) to S$4.7trn, according to the latest asset management survey released by the Monetary Authority of Singapore (MAS).

This represents a year-over-year growth of 17%, outperforming the global average growth of 11%.

The increase was supported by both net fund inflows and valuation gains.

Stronger investor appetite and improved risk sentiment in the second half of the year led to a net inflow of S$387bn, the highest after 2014. The report showed a rotation away from cash and money markets towards equities and alternatives products as investors hunted for yield.

While the traditional sector AUM posted an annual growth of 15% during the year, the alternatives sector rose 31% over the 2019 level to reach S$947bn.

AUM invested in private equity (PE) increased by 54% to S$375bn in 2020, as the MAS introduced measures to develop Singapore as an Asia Pacific private markets hub and as investors raised their exposure to the asset class in their search for yield.

Venture capital (VC) funds also registered a 49% growth to S$16n from S$11bn last year.

“Given Asia’s growing economies and advances in technological capabilities, investors are likely to continue focusing on PE and VC solutions to capitalise on the growing opportunities in the region,” said the Singapore central bank in the report.

Within the alternative sector, real estate AUM jumped 59% to S$221bn at the end of the year, overtaking hedge funds as the second largest alternative sector in the country.

Even so, public equities remained the most popular asset class in 2020, with 42% of the country’s AUM invested in the sector, followed by bonds (23%) and alternatives (22%).

In 2020, there was a net increase of 67 registered and licensed asset managers, bringing the total number of registered and licensed asset managers to 962.

Source of funds

During the year, 78% of total AUM was sourced from outside Singapore, of which 34% was sourced from the Asia Pacific excluding Singapore, 17% from North America and 16% from Europe.

“This significant proportion of AUM from outside Singapore is a slight increase from 76% in 2019 and demonstrates Singapore’s role in serving both regional and international investors,” said MAS.

The central bank also noted that global public owners continued to anchor their investment teams in Singapore to tap the region’s growth opportunities and to domicile their investment funds in Singapore using the new Variable Capital Company (VCC) framework.

Since the framework was launched in early 2020, more than 400 VCCs had been set up or re-domiciled by about 300 Singapore-based global and regional asset managers, said the MAS.

The MAS conducted its annual survey with 1,048 respondents including banks, finance and treasury centres, financial advisers, insurance companies etc.

Part of the Mark Allen Group.