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Open a Hedge Fund in Singapore

Open a Hedge Fund in Singapore

The main legislation regulating the establishment of hedge funds in Singapore is the Collective Investments Scheme Code. Hedge funds are collective investment schemes that use different strategies for raising money for investors. The main advantage of hedge funds in Singapore is that they are allowed to use a broader pool of activities and assets in order to raise money. All hedge funds fall under the supervision of the Monetary Authority in Singapore.

Our specialists in company incorporation can help you set up a hedge fund and any other types of funds in Singapore. They can also help you open any type of company in Singapore.

Types of hedge funds presented by our experts in opening companies in Singapore

Foreign investors looking to open hedge funds in Singapore have two possibilities:

  • to set up an onshore hedge fund,
  • to open an offshore hedge fund.
Quick Facts
Applicable legislation Code on Collective Investment Schemes.

Types of hedge funds

– Domestic (onshore),

– foreign-owned (offshore).

Types of investors addressed

Qualified/professional investors.

Legal forms available for registration

– Private limited liability companies,

– limited partnerships,

– variable capital companies.

Registration steps

– Documents gathering,

– legal entity registration,

– licensing (only under certain conditions).

Share capital requirements (if any)

– SGD 100,000 for single funds,

– SGD 20,000 for hedge fund of funds (HFOF).

Authorization requirements (if any)

Yes, for funds with more than 30 investors.

Licensing authority

The Singapore Monetary Authority.

Local manager required (YES/NO)

Yes, a local manager is required.

Registration timeframe (approx.) Approx. 6 months.
Types of assets to invest in

– Debt and equity securities,

– commodities,

– currency (crypto included),

– derivatives,

– real estate.

Possibility to operate abroad (YES/NO)

Yes, offshore hedge funds can operate outside Singapore.

Taxation

Singapore hedge funds are subject to taxes which can be offset through numerous incentives.

Advantages of setting up a hedge fund in Singapore

– Access to tax incentives,

– licensing exemptions for certain types of funds,

– possibility to operate in and outside Singapore.

Support in creating a Singapore hedge fund (YES/NO) Yes, we can assist with the establishment of a hedge fund in Singapore.

Onshore hedge funds are required to abide by Singapore’s licensing regulations and can be divided into:

  • open-ended trust funds,
  • closed-ended funds,
  • limited liability partnerships.

Both foreign and local investors can set up onshore hedge funds in Singapore. Offshore hedge funds are registered outside Singapore and thus under different legal requirements but are allowed to operate in the city-state.

The LLC or private limited company is the simplest business structure in Singapore. It requires a single shareholder with no restrictions on foreign ownership and a minimum number of one director. However, the director must be a Singapore resident. For support in setting up a company in Singapore, contact our local agents.

Requirements to start a hedge fund in Singapore

There are two types of licenses one can obtain in order to open a hedge fund in Singapore:

  • a capital market services license,
  • a financial adviser license.

Foreign investors setting up hedge funds with less than 30 qualified investors are not required to obtain any of the licenses above.

Capital market services licenses can be obtained under the Securities and Futures Act and are suitable for the following types of activities undertaken by Singapore hedge funds:

As seen above, Singapore hedge funds can be classified as either domestic or international under the Singaporean law. While offshore earnings can only be given to Singaporean domestic citizens at the MAS’s (Monetary Authority in Singapore) discretion, domestic funds can service to both offshore and onshore clients.

Here is also an infographic on this subject:

Our specialists are at your service with various solutions in order to help you set up a company in Singapore.

The main features of Singapore hedge funds

Hedge funds use an active management investment style with the purpose of maximizing the returns for investors. Generally speaking, they carry a lot more risk than other kinds of investment funds.

Singapore hedge funds can use the following strategies in their activities:

  • leverage;
  • short-selling;

Also, such funds usually invest in asset classes, such as cash, bonds, and listed stocks.

Other important traits of hedge funds in Singapore are:

  • they are exclusively available to approved or authorized investors;
  • these investors must fulfill specific standards;
  • they must have proof of earning SGD 300,000 or more in the previous year, or their net worth must be at least S$2 million (excluding any property value).

This is due to the fact that fund managers deal with substantial sums of money and significant levels of risk.

Fund managers have the freedom to invest in any kind of asset class through hedge funds, including equities, real estate, and land. By comparison, mutual funds are limited to investing in equities and bonds.  Also, hedge funds employ aggressive management strategies, which may involve the use of leverage, derivatives, and low-liquidity investments, in order to increase returns on capital.

You can rely on our Singapore company formation agents for information on this type of funds.

Foreign investors providing services and advice related to investment in securities, foreign exchange trading, or life insurance are required to obtain a financial adviser license under the Financial Advisers Act in Singapore.

Legislation related to investment funds in Singapore

Foreign professional investors who want to start investment funds in Singapore must comply with the following laws:

  • the Code for Collective Investment Schemes Act, also known as the CIS Regulations;
  • the Securities and Futures Act;
  • the Financial Advisers Act;
  • the Financial Advisers Regulations.

The Singapore Company Act also provides for the type of structures that can be used when opening an investment fund. Speaking of investment vehicles, at the beginning of the year the government included a new type of company for the incorporation of investment funds: the variable capital company. Our company registration agents in Singapore can offer more information on this matter.

Other types of investment funds in Singapore

The following types of investment funds can be established in Singapore:

  • open-ended retail funds;
  • closed-ended retail funds;
  • foreign funds.

These types of funds can further be divided into various sub-types, among which equity and hedge funds are among the most appreciated in Singapore.

Types of management companies and licenses for Singapore investment funds

Singapore is a highly regulated jurisdiction when it comes to creating investment funds, so it provides for several types of licenses that can obtained by administering companies.

Management companies are divided into:

  • the registered management fund company which is a company that manages assets worth SGD250 million and has the potential to attract up to 30 institutional and accredited investors;
  • the retail licensed management company which is a business that manages funds for a variety of investors, including retail and individual investors;
  • the accredited institutional licensed company – this type of business exclusively manages money for institutional and accredited investors;
  • the venture capital management company – the majority of this business’ investments are in startups. Additionally, only institutional and accredited investors may invest in this kind of business.

With respect to the licenses that can be obtained by such companies, they are divided into:

  • the Capital Markets Services (CMS) license;
  • the Financial Advisor’s license.

These licenses are issued by the Monetary Authority of Singapore.

If you want to open a company in Singapore for investment management purposes, you can rely on us.

Under the CMS license, a management company can offer the following services:

  • securities trading and funding;
  • futures contracts;
  • trading in foreign exchange with leverage;
  • providing corporate financial advice;
  • management of trusts for real estate investments;
  • supplying custodial services.

Under the Financial Advisor’s license, a company can engage in the following activities:

  • promotion of unit trusts;
  • provision of life insurance goods;
  • services for providing advice on investment goods, such as foreign exchange contracts and life insurance policies;
  • investment report issuance.

Our consultants can advise on how to set up a company in Singapore to create an investment fund management company. We can also handle the registration of the selected business entity for this reason.

Such a company can take one of the following corporate forms:

  • private limited liability company;
  • limited partnership;
  • company with a variable capital;
  • unit trust.

Requirements for Singapore hedge fund management companies

Bases on the type of license to obtain, the management company must meet specific requirements. In the case of the Capital Markets Services License, the following conditions apply:

  • a minimum capital of SGD 250,000;
  • the value of the assets under management must be above SGD 250 million;
  • it must have at least 2 directors with a minimum of experience in the financial field of 5 years;
  • at least one of the directors must be a Singapore resident;
  • the risk-based capital must be 120% of the operational risk requirements;
  • it can only service accredited and institutional investors.

With respect to management companies acting as Registered Fund Management Companies, these must respect the following requirements imposed by the MAS:

  • the maximum value of the assets to invest in is limited to SGD 250 million;
  • they must also have at least 2 directors, meeting the same requirements as for the Capital Markets Services Licensees;
  • they may service a maximum of 30 investors who can be qualified investors;
  • they are not subject to risk-based capital requirements.

If you are interested in setting up a company in Singapore with the purpose of obtaining an investment fund license, you can rely on our local agents.

The video below shows the main steps to set up a hedge fund in Singapore:

How can hedge funds be promoted?

Hedge funds may be promoted to retail investors as long as the fund is recognized or authorized.
For both onshore and offshore funds available to retail investors, the minimum subscription criteria are the same, and they are:

  • SGD 100,000 for a single hedge fund;
  • SGD 20,000 for a hedge fund-of-funds (FOHF);
  • no minimum subscription is required for hedge funds with guaranteed or protected capital.

When marketed to retail investors, a prospectus that complies with the Securities and Futures Act (SFA) regulations needs to be filed and registered. A foreign prospectus may be used by authorized offshore funds if it includes all the data needed to comply with SFA regulations.

Our company formation advisors in Singapore can offer more information on offshore funds.

Those who want to up offshore hedge funds, but want to provide their services in Singapore must respect certain compliance requirements. If you need help to apply for an investment license or want to open a company in Singapore you can contact our Singapore company formation agents.