Assets under management (AUM) in Singapore rose 17% in 2020, driven by “strong inflows into both traditional and alternative investment strategies, as well as valuation gains across major asset classes,” according to the Monetary Authority of Singapore (MAS).

AUM rose to S$4.7 trillion ($3.50 trillion) year-on-year last year, of which 56% was attributed to net inflows and the remaining 44% to valuation gains, according to the central bank’s annual report released on Wednesday (June 30).

This compares to 2019’s 15.6% growth of S$4 trillion, and 2018’s more modest growth of 5.4%.

The annual report highlighted that the inflows into alternative investment strategies included asset classes such as private equity, real estate, Reits, and venture capital. MAS declined to comment on the breakdown of asset classes or the country breakdown of inflow sources.

INFLOW SOURCES

“I would say that sources of funds are broadly diversified in terms of use of funds predominantly invested into Asia,” deputy managing director of markets and development Leong Sing Cheong said during a press briefing on Wednesday (July 1) in answer to a media question about whether the inflows came from Hong Kong.

There have been reports of wealth leaving Hong Kong for Singapore after the 2019 protests and Beijing’s imposition of the sweeping national security law last year, which has already targeted Hong Kong tabloid newspaper Apple Daily’s tycoon owner Jimmy Lai.  

However, Leong said: “Regarding Hong Kong, the broader growth trend for the asset management industry in Singapore, as I said is reflective of quite fundamental drivers, not due to this specific reason alone… We have not observed significant shifts, arising from the situation developing in Hong Kong.”

“Singapore serves as a gateway for global investors to access Asian investment opportunities, as well as a gateway for Asian investors to tap on global investment opportunities,” Leong added.

Sustained foreign inflow could have come from neighbouring countries such as Indonesia, Malaysia, Thailand, Patrick Saurini, head of wealth management and deputy chief executive of SMBC Nikko Securities for Asia Pacific ex-Japan told AsianInvestor.

"Singapore has managed the Covid spread better than other financial hubs with a circuit breaker done early to avoid any spreads and too many deaths to the opposite of neighbouring countries," he said.

In addition, "large institutional investors have decided to increase their operations in Singapore due to adverse political situation in other parts of Asia...Changes in the Hong Kong legal framework and a management of the Covid context less assured, gave more confidence to foreign investors to choose Singapore probably," he said. 

NO SURPRISE

The increase in AUM is not a surprise despite the global pandemic last year as major global financial hubs have benefited from easing monetary policies, and negative real yields have pushed investors into a multi-asset approach, said Saurini.

"Global rates are at 0% and extensive cash from central banks into the financial system has naturally generated inflows into risky assets," he told AsianInvestor.

"Holding cash at banks can no longer be considered as satisfactory or even safe; it is loss-making and the trend is unlikely to change. The average expected return of US dollar cash in real terms will probably average -0.5% per annum over the next 10 years," he added. "It calls for a rebalancing into riskier asset classes... including equity, private equity and hedge funds."

Indeed, institutional investors, including asset owners across Asia Pacific, have been shifting allocation towards alternatives. For instance, the $196 billion Korea Investment Corporation (KIC) plans to expand investment in alternatives, focusing on data centres and warehouse infrastructure and e-commerce platforms, while State Super, one of Australia’s oldest superannuation funds, is shifting the makeup of its alternatives investments to alternative risk premia and private debt.

The global private capital industry reached $7.4 trillion as of end-2020, according to Morgan Stanley and Asia Pacific private capital assets are expected to grow to $6 trillion by 2025, according to estimates from data provider Preqin.

FINTECH GROWTH

Singapore’s financial sector also grew last year by 5.1%, while the fintech sector grew by 30%, said managing director Ravi Menon during the press briefing.

“Investments in fintech firms based in Singapore reached a record S$1.4 billion in 2020, an increase of more than 30% from 2019. In the first quarter of this year, fintech companies here already raised   more than S$650 million,” Menon said.

He added that the financial and fintech sectors created 2500 jobs and are expected to create 6,500 more in 2021, particularly in technology, wealth management, corporate banking, and insurance.

In terms of its official foreign reserves investments, MAS had returns of S$8.2 billion for the financial year, mainly from “interest income and realised capital gains”, Menon said.

Investment gains were S$22.8 billion, which was “largely offset by a negative currency translation effect of S$14.6 billion, mainly due to the strengthening of the Singapore dollar against the US dollar and Japanese yen,” he added.

After deducting expenditures for operations and taxes, net profit was S$5.2 billion, half of which is returned to the government and the remainder to MAS reserves.  

MAS manages Singapore’s $362 billion worth of official foreign reserves, while sovereign wealth fund GIC manages roughly $488 billion of the government’s foreign assets and state investment firm Temasek Holdings holds $226 billion in equity in both domestic and foreign corporates.

Menon re-emphasised that MAS would continue to focus on technology, sustainability and jobs. Earlier this month, MAS announced it would allocate $1.8 billion to five fund managers to invest into climate-related investment opportunities.

This article has been edited to more accurately reflect the assets managed by GIC, Temasek and MAS.