singap 1-#148915-v1-hhm --presentation__the_zuellig_forum__a_pillar_of_growth_in_singapore_

Clifford Chance 1

The Zuellig Forum 2011

Fund Management - A Pillar of Growth in Singapore?

Clifford Chance 2

1. Singapore as a global asset management centre

2. Introduction

3. Fund management

4. Regulatory overview

3

4

6

23

The Zuellig Forum 2011: Fund Management - A Pillar of Growth in Singapore?

Contents

Clifford Chance 3

“In just over four decades, Singapore has

established a thriving financial centre of

international repute ... Singapore offers

financial institutions a pro-business

environment, excellent infrastructure, cost-

competitiveness, a highly skilled and

cosmopolitan labour force, and is

strategically located in a region of

opportunities.”

'Singapore International Financial Centre Gateway to

Opportunities in Asia and Beyond - A Well Established

and Diversified Financial Sector’

Monetary Authority of Singapore, February 2011

Singapore as a global asset

management centre


Clifford Chance 4 Clifford Chance

Introduction


Clifford Chance 5

What is the current landscape of the asset management industry in

Singapore?

The regulatory framework and how this may act as a catalyst for

growth.

Current policies and initiatives: looking to the future.

Introduction – fund management as a pillar of

growth



Fund management


Clifford Chance 7

Fund management – the current landscape

Asia-Pacific region continues

to be a key investment

destination for Singapore-

based asset managers,

accounting for 64% of total

AUM in 2010.

Asia-Pacific seen as a

distinct investment region by

global investors.


MAS 2010 Singapore Asset Management Industry Survey

Clifford Chance 8

Fund management – the current landscape (cont‟d) Assets under management, 2002-2010 (US$ trillions)


North America Europe Asia

(excluding Japan and

Australia)

Japan and Australia

0.3

0.9 0.91.1

1.3

2002 2007 2008 2009 2010

Latin America South Africa and the

Middle East

Annual growth,

2002-2007 (%)

Annual growth,

2008 (%)

Annual growth,

2009 (%)

Annual growth,

2010 (%)

Global

-21 8

11 13

-13 7

9 11

-6 11

30 26

-16 2

13 8

-17 8

11 13

-15 10

15 13

-1 18

24 22

Sources: BCG Global Asset Management Market Sizing database, 2011.

Note: Global includes offshore AuM, North America = Canada and the United States; Europe = Austria, Belgium, the Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,

the Netherlands, Norway, Poland, Portugal, Russia, Spain, Sweden, Switzerland, and the United Kingdom; Asia = China, Hong Kong, India, Singapore, South Korea, and Taiwan; Latin America = Brazil, Chile,

and Mexico. For all countries whose currency is not the U.S. dollar, we applied the average 2010 exchange rate to all years. AuM numbers for 2009 differ from those in last year‟s report owing mainly to

differences in the exchange rates used. Apparent discrepancies in growth rates are due to rounding.

Clifford Chance 9

Fund management – the current landscape (cont‟d) Alternative and passive products should keep outgrowing traditional active products


Source: BCG analysis

Note: LDI is liability-driven investment. 1Management fees net of distribution costs.

Passive products/ETFs

ETFs

Passive fixed

income

Passive equity

LDI

Fixed

income

Money market

Balanced

Quantitative

Real estate

(including REITs)

Commodities

Infrastructure

Absolute return

Private equity

Hedge funds

Alternative products

Active

equity

Traditional

active products

Structured

Estimated size, 2010

($trilllions; scale = $1 trillion Net revenue margin1 (basis point)

CAGR, 2010-2014 (%)

Clifford Chance 10

Fund management – the current landscape (cont‟d)

Asset allocation is shifting eastward....

8

2

3

10

1

5

9

23

9

25

26

22

30

51

71

69

57

79

80

74

57

85

61

63

72

63

41

27

28

33

19

15

18

20

6

14

11

6

7

0 20 40 60 80 100

Other emerging-market equity1

Corporate credit - Asian emerging markets

Government fixed income- Asian emerging …

Asian equity

Corporate credit - rest of world

Corporate credit - U.S.

Corporate credit - Europe

U.S. equity

Bank loans

Domestic equity

European equity

Government fixed income - U.S.

Government fixed income - Europe


Changes planned to 2011 asset allocation by European

institutional investors (% of respondents)

Delta

(increase minus decrease)

Percentage points Decrease Keep the same/don‟t know Increase

Sources: Pension fund survey, December 2010; BCG analysis.

Note: Because of rounding, percentages may not total to 100. 1Equity from markets other than domestic, U.S., Europe, and Asia

Clifford Chance 11


Singapore - a growing Asian hub for alternative investments

Source: McKinsey Global Wealth Database; team analysis


USD billions

2005 to 2009: Newly raised capital

of hedge funds in Asia

China 0.3

India 0.4

South Korea 0.4

Japan 2.7

Singapore 5.3

Hong Kong 8.5

Share

48%

30%

15%

2%

2%

2%

USD billions

2005 to 2010: Newly raised capital of

private equity in Asia

25

India 29

Hong Kong 38

China 57

South Korea 11

Japan 17

Singapore

Share

31%

21%

16%

13%

9%

6%

Clifford Chance 12



Assets Under Management

MAS 2010 Singapore Asset Management Industry Survey:

Total Assets Under Management (“AUM”) by Singapore-based managers as at end-2010

were S$1.4 trillion compared to S$1.2 trillion as at end-2009.

2010 represented a new high in Singapore's asset management industry.

2005 2006 2007 2008 2009 2010

Clifford Chance 13


(cont‟d)


The Economist Intelligence Unit, September 2011

Clifford Chance 14


(cont‟d)


With the breadth of products and offerings

increasing.....

Singapore is now the 2nd largest offshore RMB

settlement centre after Hong Kong.

Singapore represents ~50% of Asia‟s OTC

commodity derivatives trading volume.

Singapore asset management industry grew by

16% (vs. 13% in Hong Kong) from 2005-10.

Attractive tax exemption for trust clients was

launched in 2006, tax exemptions for onshore

funds.

Clifford Chance 15

Fund management – the regulatory framework

The Monetary Authority of Singapore

(the “MAS”)

Singapore‟s central bank

Integrated supervision of financial services

and financial stability surveillance

Development of Singapore as an international

financial centre


Clifford Chance 16

Securities and Futures Act (the “SFA”) Overview

Regulates the securities and futures industry in Singapore.

Reduces compliance costs and creates a flexible regulatory

framework, by implementing a single modular licensing framework.

Market intermediaries are required to hold a single modular licence,

instead of multiple licences, to engage in the regulated activities listed

in the SFA.

Licensing requirements

No person shall carry on business in any regulated activity or hold

himself out as carrying on such business unless he is the holder of a

capital markets services licence for that regulated activity.

Regulated activities include:

i. fund management; and

ii. dealing in securities


(cont‟d)


Clifford Chance 17

Exemptions

Onshore Singapore hedge fund managers qualify as Exempt Fund

Managers under the SFA and are not required to hold capital markets

services licence to carry on business in fund management provided that:

They act for no more than 30 Qualified Investor clients

A Qualified Investor includes:

i. a private fund (each fund managed by a Singapore manager

counts as ONE Qualified Investor, i.e. no “look through” to

underlying investors); and

ii. An Accredited Investor

An Accredited Investor includes:

i. an individual with net assets exceeding S$2 million/income in

previous 12 months not less than S$300,000; or

ii. a corporation with net assets exceeding S$10 million


(cont‟d)


Clifford Chance 18

Financial Advisers Act (the “FAA”) Overview

Governs financial advisory activities in respect of investment

products, the distribution or marketing of specific investment products

such as life insurance policies and collective investment schemes.

Streamlined licensing framework as only one licence is required to

give advice on a spectrum of products.

Licensing requirements

No person may act as a financial adviser in Singapore in respect of

any financial advisory service unless he is authorised to do so in

respect of that financial advisory service by a financial adviser‟s

licence or is an exempt financial adviser.


(cont‟d)


Clifford Chance 19

Financial advisory services include:

i. advising others on investment products

ii. advising others by issuing research reports or analyses concerning

investment products; and

iii. marketing of any collective investment scheme.

Exemptions

Financial advisers who are exempt from the requirement to hold a

financial advisers licence include:

i. a holder of a capital markets services licence under the SFA;

ii. a securities exchange, a futures exchange, or a recognised market

operator; and

iii. 30 qualified investors exemption.


(cont‟d)


Clifford Chance 20

Exempt fund manager and exempt financial adviser regimes offer

flexibility for new entrants to Singapore.

Taxation policy:

i. clear rules on tax exemptions (including a tax exemption scheme for

new start-up companies)

ii. incentives for Singapore-resident fund managers including:

• a concessionary tax rate of 10% for fund management and

investment advisory activities;

• tax exemption on specified income for qualifying offshore

funds managed by Singapore-resident fund managers; and

iii. growth of Singapore as a fund domicile: Cayman Islands of the East?

Ease of establishment: Singapore is an efficient and generally lower-

cost location for a start-up compared to other jurisdictions.


as a catalyst for growth?


Clifford Chance 21

Maintaining Singapore’s strong fund management performance…

MAS proposed revised regulatory regime for fund management companies (including new risk management frameworks for fund managers, independent auditing of fund management companies and new examinations for representatives of licensed retail fund management companies)…

MAS Annual Report 2010/2011

Fund management – recent policies and

initiatives


“ensuring that [the] regulatory regime keeps pace with global

developments and (helping) to promote the sustainable

growth of Singapore's fund management industry”

Clifford Chance 22

Fund management – recent policies and

initiatives (cont‟d)


Targeting Asian clients…..

Strong preference for home-market investing –

asset managers should concentrate on local Asian

assets.

Gaining access to more restricted markets (such as

China) by finding the right partner “optimally

structuring the partnership agreement are critical to

capturing distribution advantages”

Growth of Asian sovereign wealth funds –

“diversifying, reducing exposure to the US dollar

and focusing on alternatives and emerging markets”

The Boston Consulting Group, „Building Success‟, 2011


Regulatory Overview


Clifford Chance 24

Global Regulatory Themes – the G20 agenda

AIFMD

Private Funds Regulation

Regulatory Overview


Clifford Chance 25

Global regulatory themes

Capital Market abuse

Short selling Securities

Law Directive MiFID II

Volcker and lookalikes

Recovery fund

Investor and depositor protection

Clearing CRAs Depositaries Liquidity

SEPA migration

Corporate governance

Retail distribution

review

OTC derivatives

CCPs and CSDs

UCITS

Independent Commission on Banking

Bank taxes RRPs FSOC and

OFR

Prospectus Directive

New regulators

Remuneration Insolvency

laws Responsible lending law

Collateral directive

Bail-ins

T2S Solvency II Financial groups

Client money and assets

Private funds Transparency


Clifford Chance 26

Fundamental elements of global regulatory reform agreed at Pittsburgh G20

meeting

Strengthening bank capital and liquidity standards

Addressing systemically important financial institutions and resolutions

Improving OTC derivatives markets and core financial market infrastructures

Reforming compensation practices to support financial stability

Strengthening adherence to international supervisory and regulatory standards

Role of the Financial Stability Board (FSB)

The FSB is responsible for co-ordinating and promoting the monitoring of the

implementation of the G20 and FSB financial reforms and for reporting on it to

the G20

Priority areas - Basel III, OTC Reforms, compensation practices, policy

measures for G-SIFIs; resolution frameworks and shadow banking - will

undergo more intensive monitoring and detailed reporting

G20 commitments


Clifford Chance 27

US EU

Dodd Frank Act CRD IV

Crisis Management

Directive

OTC Derivatives

Regulation

MiFID II and MiFIR

CRD III

Credit Rating Agencies

Regulation

AIFMD / UCITS V

Implementation of G20 commitments


Clifford Chance 28

2010 H1 2011 H2 2011 2012 Onwards

• ESRB implementation

• EIOPA implementation

• ESMA implementation

• Omnibus II

implementation

• CRA 2 Regulation

• VAT & Financial

Services

• Financial

Conglomerates

Directive Review

• Deposit Guarantee

Schemes

• EMIR

• Short selling and CDS

• Anti-Discrimination

Directive

• CRD 3

• AIFMD

• Short selling

14

• PRIPs

• UCITS Review

• CRA 3

• CRA 1 Implementation

• Data Protection Directive

• Fair Value Accounting

• Hedge accounting

• Commission Green Paper on

Corporate Governance for Listed &

non-Listed Companies & Investors‟

Role

• Consumer Rights Directive

• Sanctions for violations of EU

financial services rules

• Collective redress mechanisms -

common legal principles

• Horizontal cooperation agreements

• Alternative Dispute Resolutions

(ADR) Schemes

• Transparency of debtors assets /

Attachment of bank accounts

• Savings Tax Directive Review

• Permanent crisis resolution

mechanism

• Financial inclusion

17

• Insurance Mediation Directive

• Insurance Guarantee Schemes

• Framework for crisis

management II

• Review IORP Directive

• Pensions Portability Directive

• Transparency Directive Review

• Insurance Accounting

• E-Commerce Directive Review

• CRD 4

• IFRS/US GAAP convergence

• Commission Green Paper on

Corporate Governance of

Financial Institutions

• Shareholder Rights Directive

• MIFID 2

• Market Abuse Directive Review

• Bank levy, FTT & FAT

15

• Bank insolvency regime

• Insolvency Regulation

• Collective Redress for

breach of EU Anti Trust rules

• Collective Redress scheme

for financial services

• Directive on reorganization

and winding up of insurance

undertakings

• European Contract Law

• Unfair Commercial Practices

Directive

• Securities Law Directive

• CSD Regulation

9

Proposals in the EU Legislative Pipeline


Clifford Chance 29

H2 2011 2012 2013

Proposed text CRD IV

MiFID II, MAD II

Crisis Management

Agreed text Short selling EMIR

CRD IV

MiFID II, MAD II

Crisis

Management

Implementation Short selling EMIR

CRD IV

Crisis

Management

Key EU legislation - timetable


Clifford Chance 30

Directive entered into force 21 July 2011

ESMA preparing draft technical advice which will form the basis of the

Commission‟s implementing legislation

ESMA held two consultations on technical advice during summer

2011

Next Steps: ESMA to report to the Commission by 16 November 2011

Implementing legislation Summer 2012?

AIFMD

Current Status


Clifford Chance 31 The Zuellig Forum 2011: Fund Management - A Pillar of Growth in Singapore?

Application of the Alternative Investment Fund

Managers Directive (AIFMD)

Location of

Fund

Location of

Manager Application of AIFMD

EU EU AIFMD applies in full from mid 2013.

Non-EU Non-EU If no marketing to EU investors post 2013: AIFMD will

not apply.

If marketing to EU investors post 2013:

o Provisions on transparency and on portfolio

companies;

o Co-operation arrangements to be in place

between regulators in non-EU jurisdiction and

those in all EU jurisdictions where the fund is

marketed;

o Non-EU jurisdiction must not be AML

blacklisted.

Full compliance required if marketing to EU investors

post passporting (phase-in period between 2015 and

2018).

Clifford Chance 32 The Zuellig Forum 2011: Fund Management - A Pillar of Growth in Singapore?

Application of the Alternative Investment Fund

Managers Directive (AIFMD)

Location of Fund Location of

Manager Application of AIFMD

Non-EU EU AIFMD applies in full (except provisions on depositaries which

only apply post passporting).

If no marketing to EU investors post 2013:

o Co-operation arrangements to be in place between the

Home State regulator of the AIFM and the regulator in

the jurisdiction of the AIF.

If no marketing to EU investors post 2013:

o Co-operation arrangements to be in place between

Home State regulator of the AIFM and the regulator in

the jurisdiction of the AIF;

o Non-EU jurisdiction must not be AML blacklisted.

o Agreement compliant with OECD Model Tax Convention

to be in place between relevant jurisdictions (if

marketing under passport).

EU Non-EU AIFMD applies in full from 2015 at latest. Non-EU Manager will

need to be authorised by relevant EU regulator, and will need to

appoint a legal representative in the EU. Other requirements:

o Co-operation arrangements to be in place between

regulators in EU member state of reference, Home State

of EU AIF and regulator in jurisdiction of non-EU AIFM;

o Non-EU jurisdiction must not be AML blacklisted;

o Agreement compliant with OECD Model Tax Convention

to be in place between relevant jurisdictions.

Pre [2015], as for Non-EU / Non-EU

Clifford Chance 33

EU

MiFID II

MiFIR

MAD II

Break up of the Euro?

US

Final rules for Volcker and OTC Derivatives Reform

Capital requirements for SIFIs

Judicial challenges to Dodd-Frank rulemaking

What next?


Clifford Chance 34

Questions and answers……………


Clifford Chance 35

E:

Ho Han Ming

Partner

T: +54 6410 2283

Ho Han Ming, Singapore

HanMing.Ho

@cliffordchance.com


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singap 1-#148915-v1-hhm --presentation__the_zuellig_forum__a_pillar_of_growth_in_singapore_

Education

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pension fund survey

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