Growth in Singapore’s AUM due mostly to institutional investors, not high-net-worth individuals

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The Business Times – INSTITUTIONAL investors account for the bulk of the increase in Singapore’s assets under management (AUM) in recent years, said Minister of State for Trade and Industry Alvin Tan in Parliament on Wednesday (May 10), responding to questions about wealth inflows into Singapore.

Replying to Non-Constituency Member of Parliament Leong Mun Wai’s question on foreign fund inflows through family offices, Tan said that the Monetary Authority of Singapore (MAS) does not have comprehensive data on that.

Instead, he shared data at a broader level. From 2017 to 2021, the AUM of non-retail individual clients – which include family offices, clients of external asset managers, private trusts and high-net-worth individuals – managed by financial institutions in Singapore, grew by about S$470 billion, based on MAS’ annual survey.

This accounted for about 20 per cent of the increase in total AUM for the period.

The survey does not provide a breakdown for family offices, one particular category of individual investment. But as at 2021, single family offices (SFOs) that apply for and are granted tax incentives by MAS managed about S$90 billion worth of assets, less than 2 per cent of the S$5.4 trillion in assets managed in Singapore that year, said Tan.

“Non-retail individual clients account for a small proportion (of AUM), and family offices, even less,” he summed up.

Workers’ Party MP Louis Chua asked about the value of wealth inflows and a breakdown by source country. To that, Tan replied that MAS publishes the most granular data on sources of wealth inflows by region, instead of specific countries.

For the same 2017 to 2021 period, Asia-Pacific was the top foreign source for the increase in Singapore’s AUM for high-end individual investors, “as is to be expected”, accounting for “slightly over half”.

Europe and the Americas were the next highest contributors.

Addressing Leong’s further question on local investment by SFOs that have applied for tax incentives since April 2022, Tan said the data is not yet available, as SFOs have two years from application to meet local investment requirements.

Leong had also asked about the impact of these inflows on Singapore. Tan noted that while assets are managed here, the country is used as a financial centre to access regional opportunities, with most assets actually invested outside of Singapore.

“But as these assets are managed in Singapore, they help to create jobs and value-added in our financial industry,” he said. “There are also positive spillovers to other sectors, as these investors often appoint tax and legal professionals for wealth planning and also operational matters.”

As these foreign funds managed in Singapore are mostly invested outside the Republic, they typically remain in foreign currency, thus having little or no effect on the Singapore dollar exchange rate or official foreign reserves, the minister of state added.

They similarly do not affect inflation, which “has nothing to do with foreign funds inflow into Singapore”, he said.

“Some foreign funds do flow into the private property market,” Tan continued. “However, purchases by foreigners have been relatively low, at about 4 per cent of all private residential property purchases on average over the past three years.”

When narrowed to consider family offices, he said they have “virtually no impact” on the private housing market, with no residential property transaction attributed to family offices over the last six years.

Photo by: BT

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Edmund Shing, PhD

Global Chief Investment Officer
BNP Paribas Wealth Management

Edmund has over 29 years of experience in financial markets in a wide variety of positions, ranging from proprietary trading to portfolio manager in a number of financial institutions in London and Paris.  He previously held the role of Global Head of Equity and Derivative Strategy at BNP Paribas in London from 2015 to 2020, and has been Chief Investment Officer at BNP Paribas Wealth Management since November 2020.

Edmund is responsible for piloting our investment strategy and will continues to rollout out recommendations and themes with actionable advice that brings our expertise to our clients and support to our client-facing teams.  In this time of change, his expertise in following and anticipating markets is a true value added for both our customers and those at Wealth Management who serve them.

Edmund has a PhD in Cognitive and Computing Science from the University of Birmingham in the United Kingdom, and has done advanced studies in Knowledge-Based Systems and in Experimental Psychology.  He is an EFFAS-certified financial analyst. He has also authored the book “The Idle Investor” published by Harriman House in 2015, proposing 3 simple investment strategies that take only a few minutes to execute per month.

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