SINGAPORE - Singapore's asset management industry staged a robust recovery last year in line with the global trend, aided by a strong pipeline of new managers and funds seeking to invest in the Asia Pacific region.

Assets under management (AUM) by Singapore-based managers grew at an impressive clip of 15.7 per cent to hit $4 trillion by the end of 2019, according to an annual survey by the Monetary Authority of Singapore released on Wednesday (Sept 30).

Last year's jump in Singapore AUM followed a more modest 5.4 per cent rise in 2018 to $3.4 trillion.

Global AUM, meanwhile, grew 15 per cent to US$89 trillion last year, after a 4 per cent drop in 2018.

Over the last five years, Singapore AUM expanded at a 11 per cent compound annual growth rate.

There was a net increase of 108 registered and licensed asset managers last year, bringing the total to 895.

Allocation of funds

While traditional AUM - equities and fixed income - increased by a combined 25 per cent in 2019, Singapore's alternatives sector continued to expand at a steady 12 per cent pace.

Investments into equities and corporate bonds rose while safe haven assets - such as sovereign, quasi-government and supra bonds - fell in some regions and cash allocations were down.

Allocation into equities rose to 42 per cent of AUM in 2019, from 41 per cent of in 2018.

Meanwhile, investments into fixed income assets also increased, led by flows into corporate bonds which accounted for 66 per cent of fixed income AUM last year.

Private equity and venture capital firms posted strong growth of 14 per cent and 86 per cent respectively.

Investment flows

Cementing the Republic's position as the global-Asia Pacific gateway for the industry, 76 per cent of AUM originated from outside of Singapore, 69 per cent of AUM were invested into the Asia Pacific region.

MAS said the region was also a key source of asset inflow for the money managers here.

Net inflows from Asia-Pacific clients to Singapore-based managers increased by 21 per cent in 2019, compared to a decline of 1 per cent in 2018.

Funds invested in regional assets saw growth of 24 per cent, compared to a gain of just 1.3 per cent in 2018.

Within the Asia Pacific, South-east Asian countries remained key investment destinations making up 37 per cent of the total invested across the region.

VCC framework

MAS said Singapore is also fast becoming an Asia Pacific hub for asset managers seeking a destination to co-locate their fund management activities alongside their investments domiciles through variable capital companies (VCC) - a new flexible corporate structure designed for the said purpose.

The central bank and the Accounting and Corporate Regulatory Authority (Acra) launched the VCC framework on Jan 15, 2020.

As of mid-September, more than 120 VCCs have been incorporated with Acra since the launch of the VCC framework, it said.

"The VCC has attracted diverse interest from global and local asset managers due to its flexibility, such as its ability to be used as either a standalone fund or as an umbrella fund with multiple sub-funds, across traditional and alternative investment objectives," MAS said.

Covid-19 challenges

Beyond the new VCCs, 86 new asset manager licenses and registrations were issued in the first three quarters of 2020.

"Despite the ongoing Covid-19 pandemic and lingering uncertainty on the full extent of its implications on the asset management industry, Singapore continues to be an attractive place for business," MAS said.

MAS said it has been working closely with Singapore-based asset managers to minimise business disruptions as well as support them in upskilling and venturing into new business streams.

These efforts will ensure that the industry is well positioned to capitalise on new opportunities as the economy recovers, the central bank said.

MAS said that environmental, social and governance (ESG) considerations continue to be at the forefront of investors and asset managers' minds.

Despite the dampening impact of Covid-19 on investment sentiment, global net inflows into sustainable funds have increased this year.

Singapore's share of ESG managed assets stood at 28 per cent in 2019, compared to 27 per cent in 2018, the survey found.