Singapore aims to introduce a framework for open-ended investment companies (OEICs) within the next 12 months as part of efforts to encourage asset managers to domicile products in the city state.
Indranee Rajah, Singapore’s senior minister of state for law and finance, made the announcement at the IMAS conference in the Lion City yesterday.
The Monetary Authority of Singapore and the Accounting and Corporate Regulatory Authority are studying the introduction of a regime for OEICs that would offer a more efficient structure for investment funds than the current unit-trust approach.
The OEIC structure seeks to cater to the core activities of investment funds, which include the regular issuance and redemption of shares, valuation of funds’ net assets and appointment of asset managers and custodians.
The framework also allows for the set-up of an umbrella structure containing sub-funds, which can be operationally distinct with different investment objectives, investors and assets and liabilities.
The idea of an alternative investment fund structure was raised by consulting firm PwC in 2013, following a survey of asset managers, and this resulted in the publication of a white paper.
Justin Ong, asset management practice leader for Asia Pacific at PwC, said fund houses it surveyed in 2014 said they wanted to see a flexible and more efficient structure if they were to use Singapore as an investment management base.
The current regulatory framework in Singapore caters mainly to investment funds set up as unit trusts, which are not well known outside Asia and use a corporate structure, based on an operating company with a headcount and payroll. This is not effective for investment funds that require frequent subscriptions and redemptions, Ong told AsianInvestor.
The OEIC framework would be designed to work for both retail and alternative funds. The former require an open-ended structure, while the latter, such as private equity and real estate strategies, work on a closed-end basis and so need a variable structure, he noted.
The MAS has completed the legal study, and work is due to be carried out on the legal structure and legislation with a view to the framework going live within 12 months.
Hong Kong is making a similar move. The government published the Securities and Futures (Amendment) Bill 2016 on January 15, which introduces a legal, regulatory and tax framework for an open-ended fund company regime. No target date has been given for when it will come into force. An open-ended investment fund could previously only be set up in Hong Kong in the form of a unit trust.