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Alts assets surge in Singapore

Alternative assets in Singapore grew 17% to S$478bn ($351bn) last year, with real estate, private equity and venture capital contributing the bulk, according to the Monetary Authority of Singapore’s asset management survey.

In the alternatives space, private equity and hedge funds account for 60% of total assets. However, real estate saw the highest increase in the asset classes, with AUM growing by S$21bn.

Alternative assets (S$bn)

 Source: MAS

Private banks and wealth managers operating in the Lion City are promoting alternatives to their clients.

For example, James Cheo, an investment strategist at Bank of Singapore, said in a research note that private equity is a “crucial part” of the bank’s asset allocation.

Besides diversification, private equity can potentially offer better long-term returns, he said, noting that there could be some volatility along the way.

“This is to compensate investors for assuming illiquidity risk as the holding period of private equity investments is typically four years or longer.”

Arnaud Tellier, Singapore-based head of investment services for Asia-Pacific at BNP Paribas Wealth Management, told FSA previously that alternatives serve as a mid-to-long term diversifier with the probability of achieving higher-than-average risk adjusted returns compared to traditional asset classes.

The survey noted that the MAS is working with the industry and government stakeholders to develop Singapore’s venture capital and private equity industry. Initiatives include simplifying the authorisation process and regulatory framework for venture capital managers, deepening the talent pool and building a pipeline of alternative market platforms that can facilitate private market exits.

AUM from outside

Overall, Singapore’s total asset management to include wealth management, mutual fund firms, insurance industry and others, grew 7% to S$2.7trn in 2016, according to MAS.

The survey noted that 78% of Singapore’s total AUM was sourced from outside Singapore.

Source of assets

 Source: MAS

MAS believes Singapore serves as a regional hub for a growing pool of institutional investors to access global markets and private market opportunities in Asia. These include the Investment Company of People’s Republic of China, Korea National Pension Service, Norges Bank Investment Management and the Swiss National Bank, which maintain investment offices in Singapore.

In terms of investment destination, Asia-Pacific was a key destination for all asset managers in Singapore. The region accounted for 66% of total AUM. Within Asia-Pacific, 39% of the AUM was invested in the Asean region.

Investment destination

 Source: MAS

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