Singapore’s asset management industry grew 16% year-on-year in 2021, reaching $4 trillion, or S$5.4 trillion, led by alternatives growth, according to the Singapore Asset Management Survey 2021 released by the Monetary Authority of Singapore (MAS) on Friday (October 21).
The rate of growth is slightly lower than 2020’s 17%, but outpaces global asset under management (AUM) growth, which stood at 12% in 2021. However, the MAS cautioned in the report that AUM growth in 2022 is expected to moderate amid geopolitical and macroeconomic risks.
“Notwithstanding this, we continue to see keen interest from global and regional asset managers to set up office in Singapore, and/or to designate Singapore as one of the key nodes of their global operations, to tap into the strong network of private wealth managers, family offices and institutional asset owners, as well as investment opportunities in Asia,” the regulator wrote.
Four-fifths (78%) of AUM originated from outside Singapore, and 90% of total AUM was invested into assets outside Singapore. Within Asia Pacific, 17% of AUM was invested in Southeast Asia.
The country's asset management growth came as little surprise to Puay Lit Tan, director of institutional sales for South Asia at BNP Paribas Asset Management, especially with the rising interest in Asean markets from an institutional investor perspective.
"With US and China’s cooling relationship, some real economy investors have turned their attention into the regional economies of ASEAN, which tends to benefit also a regional financial centre like Singapore," he told AsianInvestor.
"Singapore has also benefited from HNW [high-net-worth] flows for investors looking for a safe harbor for their assets and also the strong push by the authorities to attract family offices," he added.
MAS also reported that 146 new licensed and registered fund management companies were set up in Singapore, bringing the total number of such firms to 1108 as of December 2021.
Most of the AUM growth was attributed to net inflows, with 58.9% (S$448 billion) contributed from net inflows, and the rest being made up of valuation gains. The proportion was similar last year with 56% from net inflows and 44% from valuation gains.
Discretionary AUM continued to make up more than half of total AUM, at 52% in 2021. “This is in line with the trend of asset managers basing their key investment professionals and decision makers in Singapore,” MAS said.
Alternatives continued its growth in the city-state, reaching $0.9 billion AUM after a 30% year-on-year increase. Venture capital and private equity had the biggest growth of 48% and 42% respectively.
Real Estate Investment Trusts (REITs) however had the slowest growth of just 4%.
"With more assets being managed in the region, it makes sense that alternatives will also grow in importance as investors look for ways to diversify their sources of returns," Tan said. "This also becomes important as the listed traditional markets are finding challenges with the monetary tightening seen around the world. Alternatives which are less correlated to the markets could potentially play an important part to balance out investors’ risk."
In addition, MAS anticipates further growth in the private credit space, the report said, with active investors in Asia growing by 3% and global AUM expected to exceed $2 trillion by 2025, from the current $1.21 trillion.
Last month (September), the central bank committed to $1 billion in investments with global private credit fund managers as part of its expansion of the Private Markets Programme (PMP).
Unsurprisingly, managed assets overlaid with environmental, social and governance (ESG) considerations grew 77% to make up 58% of the total AUM. More asset managers have begun offering ESG strategies too – 279 in 2021 compared with 240 in 2020.
Fund management houses have increasingly set up sustainability hubs in Singapore, as MAS awarded ESG mandates to five foreign asset managers with a combined AUM of $11 trillion.
More than 660 Variable Capital Companies (VCCs), a new corporate structure that allowed offshore investment managers to set up an entity in Singapore, have been incorporated or re-domiciled in Singapore as of October 14, according to the report.
They represent over 1,300 subfunds and are managed by 420 regulated fund management companies, the report wrote.
BNP Paribas Asset Management's Tan echoed MAS' expectations of slower asset management growth in Singapore in 2022 due to market volatility as well as geopolitical and macroeconomic uncertainties.
"However, there is a lot of liquidity sitting on the sidelines as investors bide their time and this will be quickly deployed once the landscape improves," he said.