Tighter regulations for smaller fund management companies have not stopped the growth of such players in Singapore.
Higher standards in auditing and stricter capital requirements have, however, meant that "less serious" fund management service providers have dropped out of the industry altogether.
The latest figures provided by the financial regulator, the Monetary Authority of Singapore (MAS), showed that the number of Registered Fund Management Companies (RFMCs) stood at 260 as of last Thursday.
This scheme was introduced in August 2012 to strengthen the regulatory regime for the fund management industry, particularly the smaller players.
Known as boutique fund managers, such firms operated as Exempt Fund Managers (EFMs) and were excluded from many rules governing bigger players.
These entities were defined as those that managed funds for up to 30 accredited investors. These are individuals whose net personal assets exceed $2 million or whose annual income is $300,000 or more.
The RFMC category replaced the EFM category, covering fund managers who serve up to 30 qualified investors and have up to $250 million in assets under management.
Fund managers with more than the amount of customers or assets under management would have to hold a Capital Markets Services (CMS) licence for fund management.
Most of the smaller EFMs moved to the RFMC scheme.
The MAS said there were more than 400 former EFMs that had applied for licensing or registration by February last year, at the end of the transitional period for the change in the regulatory regime.
With 260 RFMCs, the remaining EFMs, or about 140 of them, had opted for a CMS licence.
Consultant PricewaterhouseCoopers had estimated in a report that Singapore had about 540 EFMs under the previous regime.
This means that about 140 EFMs could have either wound up their business or merged with others.
An MAS spokesman said the RFMC scheme was introduced "to ensure that the regulatory regime in Singapore kept pace with global industry and regulatory developments".
The spokesman added: "RFMCs add diversity to the fund management industry and cater to the business needs of smaller fund management companies that do not have the same market reach and impact as larger fund managers."
One such player is Rainforest Research, which was set up in 2010 and was among the first EFMs to migrate to the new scheme in 2012.
The firm, which has more than US$5 million (S$6.2 million) of assets under management, has seen a return on investment of 15 per cent over the past two years.
"There was a bit more work during the period of transition naturally, because we had to do more paperwork, but subsequently it has been manageable," said its director of investments Richard Choong.
He said the stricter requirements under the RFMC did not pose any compliance issue for Rainforest Research, as the firm offers straightforward products and its processes are well documented.
In a classic case of David versus Goliath, while his firm faces stiff competition from the bigger boys, Mr Choong is not daunted as it is already attracting interest from foreign private pension funds.
"It is an alternative investment option for people, for society," he said. "Many of us boutique fund managers are industry veterans who have an idea about how to drive the returns without the shackles of bureaucracy or paperwork in a big organisation."
One EFM that is in the process of transiting to the CMS licence for fund management is Japanese firm ACA Investments, which set up its unit here in 2007 in part because of Singapore's transparent and clear regulations.
Its managing director Ataru Onuma said prospects here continue to be bright.
"Our fund does investments of both private and publicly listed firms, and Singapore is situated in a location with good access to the growth region of Asia-Pacific."