Is MAS prepping new investment mandates?

Singapore-based fund management executives sniff opportunities from government coffers.

The Monetary Authority of Singapore is reportedly considering releasing a new round of investment mandates to external fund managers, according to market participants. The MAS did not respond to inquiries seeking comment.

The MAS and the Government Investment Corporation (GIC) have together outsourced S$37 billion ($22 billion) since 1998 to global fund management companies as well as local players and boutiques. Some of this money has been for core investment portfolios, but a lot of it has been earmarked 'developmental' to establish Singapore as a regional hub for investment management.

Although this programme has been a success, nonetheless there has been a slow leakage. Some fund houses, unable to source assets other than from government mandates, have left or closed their Singaporean-domiciled fund lines, including AIG, BNP Paribas, Invesco and Morley. Morley closed its Singapore office last year.

According to some views, the GIC, allegedly keen to nip this in the bud before it becomes a trend, announced a few months ago that it would release S$5 billion ($3 billion) in new mandates, about a third of which would be dedicated to investments in emerging Asian markets. The MAS is now said to be considering a parallel move.

"These developmental pools of money are not meant to attract new global fund managers to Singapore but to help the ones already here," says one fund management executive. That's why the emphasis seems to be on regional securities portfolios, not global ones.

Says another: "There's a bit of soul searching about whether the government's strategy behind attracting global managers was the right one," noting his suspicion that the MAS and GIC's experience with external managers has been mixed.

Other fund managers are sceptical, however, that either the GIC or the MAS are going to filter a lot of new money into the market. These managers argue that the bulk of their outsourcing ended in 2001 and it is now time to start three-year performance reviews. They believe that while the next year may see a lot of new mandates, it is from turnover, not from fresh pools of money. The GIC is also restructuring its investment outsourcing department, a process that will require hiring and firing external managers.

Also, while a few fund houses have stripped back operations in Singapore, this is sometimes because the Lion City has also allowed foreign players to directly market offshore funds to local citizens. This has made Singapore dollar-denominated funds less attractive, but has prompted other firms such as Fidelity and Morgan Stanley to open new international currency business here.