Singapore-based hedge funds will face higher operating costs if rules proposed by the central bank are implemented, the Alternative Investment Management Association (AIMA) said on Thursday.

Singapore has become a hotspot for hedge funds and other alternative asset managers in recent years due to tax incentives and strict secrecy rules. Hedge funds in Singapore manage about US$35 billion ($48 billion) in assets, according to AIMA. 

“Our member managers will be impacted by the proposed changes, particularly in the areas of capitalisation and executive staffing,” AIMA Singapore Chairman Michael Coleman said in a statement. 

Responding to a Reuters query, AIMA said 5-7% of about 140 Singapore-based hedge funds have only one fund manager and will need to find a second to comply with new regulations proposed by the Monetary Authority of Singapore (MAS). 

 

“The start-up boutiques and the smaller firms might be affected by this requirement,” it said. 

 

This week, MAS proposed to replace its “exempt fund manager” regulatory regime for smaller funds with a new set of rules requiring all firms to have at least two full-time staff in Singapore. They are required to have a minimum of five years experience in fund management.

 

The new rules also require firms maintain a base capital of least $250,000 at all times, which “should not be considered onerous for a serious player in the fund management business”, according to AIMA. 

 

Firms with assets under management exceeding $250 million or that manage funds for retail investors must comply with additional rules such as employing a full-time compliance officer in Singapore and setting aside risk-based capital. 

 

The central bank said it will give affected fund managers 18 months to comply with the tougher proposed rules.