Chinatown new home for hedge funds

Published June 19, 2007

Chinatown new home for hedge funds

Hedge fund action centres at 23-storey One George Street


(SINGAPORE) Hedge fund managers around the world have clustered in locations with character, such as leafy Greenwich, Connecticut in the US, and the stately Mayfair neighbourhood in London.

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Alternative environment: Several smaller hedge funds rent space at Telok Ayer Street and Amoy Street (above)

The latest focal point for hedge funds is Singapore's picturesque Chinatown, where pastel-coloured traditional shop houses, ornate Buddhist temples and Chinese clan houses are within walking distance from the financial district.

'Hedge fund managers like to be in a slightly more alternative environment. It's understandable that if you've worked in an investment bank for a long time, you would seek to escape the glass-walled environment,' said Kate Colchester, a director at Singapore-based hedge fund research firm Eurekahedge.

With registered hedge fund assets of about US$10 billion according to Eurekahedge, the hedge fund industry in Singapore is smaller than in Hong Kong, which has about US$33.5 billion in hedge fund assets, according to official data.

But adding Singapore-registered hedge funds to global hedge fund assets managed here, Merrill Lynch estimates that hedge fund assets managed in Singapore total up to US$25 billion and could rise to US$100 billion in three years.

While several smaller hedge funds rent space in between the restaurants and tea houses of Telok Ayer Street and Amoy Street, the centre of much of the hedge fund action is One George Street, a gleaming 23-storey office block.

Like One Curzon Street in Mayfair, the building has attracted a string of hedge fund tenants, including Tudor Capital, Man Investments and Alphadyne Asset Management.

One George Street's proximity to the city's downtown has also sucked in some of the biggest names in the traditional asset management industry, including Fidelity, Legg Mason and Singapore's leading fund manager Lion Capital.

The latest arrival was Swiss-based RMF, which has US$23 billion of hedge fund assets globally. In January, RMF moved its Asian headquarters to Singapore from Tokyo in January, largely because of the attractive regulatory climate, international environment, and better lifestyle for its employees.

'We made a review of all the major financial centres in Asia and after that, Singapore came out at the top,' said Adrian Gmuer, business manager at RMF, which is part of Man Investments.

Last year 102 Asian-focused hedge funds had their decision-making centres in Singapore, compared to 152 in Hong Kong, 122 in Australia, 80 in Tokyo and over 250 in London, Eurekahedge said.

Industry watchers say that low taxes, flexible regulation and a vast pool of money are the main attractions for hedge funds, along with Singapore's clean air and English-speaking workforce.

One major draw is the presence of two big state-backed investment firms - Temasek Holdings and Government of Singapore Investment Corp (GIC), which manages Singapore's reserves.

Temasek and the GIC have assets of US$84 billion and US$100 billion respectively, and many of the fund managers who flock to Singapore compete for the mandates to invest the portion that is placed with independent investment firms.

The GIC, which has 20 per cent of its portfolio in hedge funds, private equity, real estate and commodities, may increase its investments in hedge funds and private equity, executives said last year.

Last month, two former executives from Goldman Sachs launched Broad Peak Management, a hedge fund firm with more than US$1 billion in assets - including money managed for Temasek, according to industry sources. State-owned Temasek invests in hedge funds through its Fullerton Fund Management unit.

Hedge fund managers say there are several other advantages of being based in Singapore, even for funds which invest in South-east Asia, Japan or India, including tax breaks, and an attractive legal and regulatory environment.

'From a regulatory perspective, Singapore is actually more flexible as compared to Hong Kong,' said Justin Ong, wealth management specialist at PricewaterhouseCoopers Singapore.

He said that fund managers who meet the Singapore regulatory requirements for exemption from licensing are up and running in two weeks, while 'start-ups in Hong Kong need to be registered and licensed with the Hong Kong regulator, including sitting for and passing exams before they can commence operations - which will take them up to three to four months'.

RMF's Mr Gmuer said the buzz in Singapore reminds him of the time he spent in New York between 2000 and 2003, when the hedge fund industry exploded into the mainstream in the United States.

'At all those cocktail parties in New York, you would bump into all kinds of people from the hedge fund industry. The exact thing is happening here,' he said. - Reuters


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Where the action is: One George Street has attracted a string of hedge fund tenants including Tudor Capital, Man Investments and Alphadyne Asset Management, as well as some of the biggest names in the traditional asset management industry including Fidelity, Legg Mason and Singapore's leading fund manager Lion Capital.