Singapore's asset management industry turned in strong figures last year, driven by interest in the Republic as a pan-Asian asset management hub and Asia's growth.
Total assets managed by locally based managers surged by 30 per cent to $2.4 trillion last year, said the Monetary Authority of Singapore (MAS) in its annual industry survey report. This was considerably faster than the 11.8 per cent growth in assets under management (AUM) in 2013.
Rising urbanisation and policy-led reforms are some factors supporting Asia's long-term economic prospects, resulting in wealth accumulation.
That, in turn, has led to greater demand for investment solutions, said the MAS.
Traditional asset managers contributed to the growth, as traditional AUM rose 38 per cent, mostly driven by global asset managers expanding their scale of investment activities in Singapore.
Growth of traditional assets under management (AUM), driven mostly by global asset managers expanding their scale of investment activities in Singapore
Growth of alternative AUM
Alternative AUM grew 17 per cent, with private equity - including venture capital - recording the strongest growth, owing to "a favourable environment for fund raising and investments".
Alternative asset managers include hedge funds and private equity funds, which cater to institutional and ultra-wealthy clients.
Assets managed by Singapore-based private equity grew 24 per cent to $93 billion, while hedge fund AUM grew 21 per cent to $108 billion. The report noted that 81 per cent of total AUM was sourced from outside Singapore, compared with 77 per cent in 2013.
The breakdown is 54 per cent from the Asia-Pacific region, 19 per cent from Europe and 18 per cent from North America.
Singapore not only serves regional and international investors but is also a regional hub for a growing pool of institutional investors, the report said. Most of the assets managed here - about 68 per cent - were invested in the Asia-Pacific last year, about the same as 2013.
Investors' allocation to equities rose from 47 per cent to 50 per cent, and allocation to alternatives inched up from 14 per cent to 15 per cent. The report said: "Investors favoured investment strategies that offered relatively higher and uncorrelated returns in the low-yield environment."
Asia's economic development is also still attractive to investors. However, the MAS noted structural trends that could change the asset management industry. It said investors' expectations have changed, leading to more interest in multi-asset or outcome-oriented strategies, for instance.
The regulator also sees financial technology as a potential game changer as it disrupts the industry with better business models, and helps clients make better investment decisions. To deal with the new challenges, the MAS said that it has "initiatives to strengthen the asset management industry".
The MAS also said in June that it has committed $225 million over the next five years under the financial sector technology and innovation scheme.