Singapore’s emergence as a preferred destination for global wealth management and financial services is reshaping its economic landscape. As billionaires like Ray Dalio set up shop in the city-state and asset management industry wealth doubles to approximately $4 trillion in just six years, Singapore is positioning itself as a significant player on the world stage. This report examines the implications of Singapore’s growing prominence in the global financial sector for its economy.
Singapore has long aspired to be a key global financial hub, and recent developments indicate it is steadily achieving this goal. The city-state’s attractive features include political stability, a highly educated workforce, low income tax rates, zero levies on capital gains or inheritances, and incentives for multinational corporations to establish their Asian headquarters in Singapore. Its strategic location in Southeast Asia further enhances its appeal to investment managers focused on the region.
The government of Singapore has played a proactive role in fostering the rapid expansion of the asset management industry. In 2020, it introduced a legal structure known as a Variable Capital Company (VCC) that provides tax and legal incentives for hedge funds, venture capital, and private equity firms to establish themselves in Singapore. Over 600 companies have already taken advantage of the VCC program as of October last year.
Family offices influx
Leading global money managers, including Marshall Wace, Citadel Enterprise Americas, and D.E. Shaw, have significantly expanded their presence in Singapore. Hedge fund assets in the city-state surged by 30% in 2021, reaching S$257 billion ($191 billion), the largest dollar increase on record, according to the Monetary Authority of Singapore.
Singapore has also witnessed a remarkable increase in family offices, which manage the affairs and wealth of affluent families. Their numbers grew from 400 in 2020 to 1,100 at the end of last year, propelled by tax reforms in 2019 and a program expediting residency for the ultra-wealthy.
Despite its remarkable progress, Singapore faces some challenges. Recent scandals have impacted its clean reputation, leading to increased scrutiny of foreign money flows. In the ongoing rivalry with Hong Kong for the title of Asia’s top financial center, Hong Kong maintains an edge due to its status as the gateway to China’s vast economy and its larger capital market.
Singapore’s ascent as a global financial hub is reshaping its economy, with rapid growth in the asset management industry and a burgeoning number of financial firms and family offices. While challenges persist, the city-state’s strategic advantages and proactive policies continue to attract global wealth, diversifying its economic landscape and cementing its status as a financial powerhouse in Asia and beyond.