Three emerging trends to guide the sector amidst ongoing pandemic uncertainty and dynamic market conditions.
As Singapore’s investment management sector heads into 2022, it remains resilient despite challenges posed by market volatility and the COVID-19 pandemic. While the outlook is generally positive, ongoing uncertainties, particularly regarding the Omicron variant, will continue to shape strategic decisions. In this article, we explore three key trends that are set to play a crucial role in the evolution of the sector this year.
1. The Surge of Digital Assets
Digital assets, particularly non-fungible tokens (NFTs), have captured the global spotlight in recent months. NFTs offer a new way to represent and trade digital property, from art to tweets, using cryptocurrencies as the primary medium. These assets have attracted significant interest from investors and funds in Singapore and the broader Southeast Asia region, offering new revenue streams for industries like art, sports, fashion, and gaming.
However, while NFTs are still unregulated and volatile, their rise signals a broader shift towards digital assets. Investment houses and fintech firms in Singapore are increasingly launching funds focused on digital assets, and the city-state’s strong regulatory framework positions it as a leader in this space. Moving forward, Singapore may need to update its regulatory structures, such as the Financial Sector Incentive Scheme, to incentivise digital asset activities and extend existing tax exemptions to certain digital assets.
2. The ‘Onshorisation’ of Funds
Historically, offshore jurisdictions like the Cayman Islands and British Virgin Islands have been favoured by many global fund managers. However, increasing scrutiny from regulatory bodies and tax authorities, along with the fallout from high-profile data leaks, has prompted a shift towards “onshorisation,” with more funds being established in jurisdictions like Singapore.
Singapore’s favourable legal environment, including the re-domiciliation regime and the successful introduction of the Variable Capital Company (VCC) structure, has made it an attractive location for these funds. The VCC structure, which has seen over 300 incorporations since its introduction in 2020, will likely continue to play a vital role in attracting funds, particularly those with a pan-Asian strategy.
3. Transitioning Back to the Workplace
Like many industries, the investment management sector is navigating the transition back to the office following the pandemic. Hybrid working models are now commonplace, but how firms approach this transition will depend on their business priorities and talent needs. Some firms may opt for a majority return to the office, while others may embrace a more flexible approach.
As firms adapt to this new way of working, they will need to focus on talent communication and support for employees navigating increased uncertainty. Additionally, many firms are looking at ways to incorporate talent-centric initiatives that align with their long-term strategic goals, including environmental, social, and governance (ESG) considerations, while enhancing upskilling programmes for their employees.
As firms plan their return-to-workplace strategies, they must also consider the regulatory and tax implications, particularly regarding permanent establishment risks, to ensure that their new workplace models comply with local laws.
These three trends will play a pivotal role in shaping the future of Singapore’s investment management sector in 2022, helping the industry adapt to changing market dynamics and the ongoing impact of the pandemic.
