140. Competing for capital: Strengthening Asia-Pacific's asset management ecosystem

0:00You've got big plans for your money. You invest, you track, you plan ahead. But does your financial app actually help you decide what to do next? Quicken helps you go beyond balances and basic reports. Project your cash flow, dig into your investments, and use Quicken AI to understand what matters across your finances. With Quicken, you can make sense of your options and decide what to do next. Quicken. Know what to do next. See how at Quicken.com. Cash Now More Later from Opendoor gives you cash up front for your home, plus all the profit later. That's no chaos now, no cash left behind later.

0:36Skip the showings now, pocket extra profit later. This is so simple now, this is so awesome later. Or sell fast now and pop the champagne later. Cash Now More Later, now available nationwide. Start your offer at opendoor.com slash ACAST. Profits calculated after fees and costs, eligibility, and offer price may vary. 500 orders a month was manageable. 5 ,000 is madness. Embrace intelligent order fulfillment with ShipStation, the only platform combining order management, warehouse workflows, inventory, returns, and analytics in one place. What used to take five separate tools, ShipStation does in one.

1:14Automate fulfillment and rate shopping to ship up to 15 times more with up to 90 % savings. Go to ShipStation.com and use code AUDIO to try ShipStation free for 60 days.

1:30Well, hello and welcome back to the Long Short, the podcast from EMA. I'm your host, Tom Kyo. This is the latest in what has become something of an Asia-Pacific series for us. Over the past year, we've explored everything from Japan's asset management reforms, Korea's growing hedge fund market to Hong Kong's efforts to strengthen its competitiveness as a global financial center. One thing has become increasingly clear throughout these conversations Asia-Pacific really continues to thrive as one of the world's most dynamic regions for alternative investment management and for the alternative investment industry.

2:12But success does not happen by accident. Governments across the region are thinking carefully about how they attract investment, talent and innovation and how they ensure that their financial centres remain globally competitive. So that's exactly what we're discussing today. Over recent months, EIMA has been engaging with policymakers across the region, most recently in Singapore, where we've submitted a series of recommendations to the Monetary Authority of Singapore to help strengthen the country's long-term competitiveness. That builds on our earlier work in Hong Kong, where reforms to the tax framework have helped reinforce the jurisdiction's attractiveness for asset managers.

2:55And to discuss all of that, I'm delighted to welcome my colleague, Kersheng Lee, co-head of EIMA Asia-Pacific and the person leading EIMA's government affairs work across the region. Kersheng, it's great to have you on the long shore today. Thanks, Tom. It's great to be here with you on the industry's biggest and bestest podcast. Thank you. So you're speaking to us, as I said, from Singapore. So for any listeners out there, it would be great if you could give us a sense of the size of the asset management industry in Singapore and how this compares with, say, other financial jurisdictions. Right.

3:35Well, let's start with the map. As they say, geography is destiny. So Singapore is about, give or take, 735 square kilometers, depending on whether it's high tide or low tide. That's about two-thirds the size of Hong Kong, and a shade smaller than the five boroughs of New York City, and about a fifth of the size of Rhode Island. Six million people on this very tiny space of land. We're one degree north of the equator, which means the weather, really the climate, has only two settings, hot and hotter with rain. And there's 90 plus percent humidity almost all year round. So to put things in context, really no hinterland, small market, no resources.

4:16And I would say we don't even have enough of our own drinking water. But looking at the financial services industry, just taking the numbers from the MES, which is the central bank and the market regulator in Singapore, AUM or assets under management for our industry has grown at almost 50 % right up to 2024. So a five-year period has gone up almost 50%. And just this week, I think about 48 hours before we are recording this, the MES just published their latest AUM figures for industry. That is up to almost 10 % year on year over last year. So we're looking at really how much the industry has grown over the last five or seven years.

5:00And today the AUM in Singapore, the collective essence under management, management industry is almost 5.2 trillion US dollars. So that's a quite rapid growth. So yeah, that's Singapore for you. But I should also mention for our listeners that besides financial services on this island, Singapore is the world's largest forex center. You know, we know it as the busiest transshipment port on earth. It's one of the best airports in the world. But there's something that not many people know of, which is Singapore actually is responsible for 10 % of global semiconductor supply. So 10 % of the world's global semiconductor is manufactured in Singapore.

5:40And 20 % of the semiconductor manufacturing equipment is also made in Singapore. So I guess my point, and I'll finish up on this point, is to put Singapore in context that it has a very well-diversified economy beyond financial services. It has advanced manufacturing. But everything on this island happened not by chance, but by design. It's very much built by human beings on this small piece of land. Yeah. And while I've had the privilege of being there several times, including a guest of you at our Singapore forum that we hold each year. So, I mean, I would say if anybody hasn't had a chance to do so, they, one, should come along to our forum each spring.

6:23But secondly, spend some time in Singapore, as you say, like it's a beautiful place to be and some very interesting places to visit. And as you say, man-made structures as well makes it quite unique to other places that I've been to, certainly. But if we may, Kirsheng, touch a little bit on growth and competitiveness and this whole theme that financial jurisdictions have been pursuing for several years now, but it's really become quite striking in terms of the direction of travel and how jurisdictions across the world are really pursuing this theme around growth and competitiveness. Why has it become such an important issue for financial centres across the world?

7:18And included in that would, of course, be the APAC region. Right.

7:26to answer the question of competitiveness and you're absolutely right to put a finger on that and that is a central thread that runs through the letter that we sent to the amas i think a couple of things have changed as to why it sharpened the focus on competitiveness and i meant this as a general comment on the work that we as amr you and i collectively with the rest of our team members do around the world as we advocate for members in more than 60 countries. I think two things have changed. One is that it's no longer just a question of mobility. It's a question of intent. So if you are a government, you're a policymaker, you're a regulator, you're really looking at how can we design our financial center as a jurisdiction?

8:07How can we design deliberately, almost with intent, to capture managers' capital and talent? That means that policymakers and regulators have to be very mindful, almost deliberate about how they think about tax, residency, how they attract talent, access to technology, market infrastructure. I think that's the first point. So it's a question of intent and doing that in a very deliberate fashion, how you design your center to be appealing and attractive to talent and to capital flows. I think the other point that has really changed a lot to sharpen the focus and competitiveness, and that is where I think AMO's role come in, which is we are always looking to maximize the ability of our members to be successful wherever they are, to be impactful, because we are mindful of the role that our industry plays.

8:59We are fiduciaries. We manage savings and investments of other people. That comes with a huge responsibility. So it's about having conversations as AMA with members and policymakers around the region about the operating realities on the ground, which is something I know we'll come on to speak about more in the context of Singapore in the letter. So having those candid, constructive conversations about operating realities and how, you know, as in a collaborative fashion, we as an industry with governments and regulators can make the operating environment better. And that's how it ties with competitiveness.

9:38And just going back to Singapore, we started this conversation by saying everything in Singapore is built by hand, man-made. It's not a natural condition. In fact, our foreign minister described Singapore recently in an interview as an act of desperate imagination. An act of desperate imagination, saying that the greatest fear for Singapore, Tom, is that of irrelevance. So we constantly have to optimize, constantly have to be better to be of value to the world. And that's how you stay on your feet. Well, that's a lovely segue into this letter that you've recently authored on behalf of the asset management industry and our members in Singapore.

10:25Kersheng, you wrote to the Monetary Authority of Singapore, proposing a series of recommendations for the asset management industry there. Why did you feel, I mean, you talk about having to constantly reimagine, so I'm guessing the answer lies within, but you felt that this was an important moment to engage with the MAS, and what broader conversation are you hoping to have with them? Why are we engaging the MAS? I guess the letter was building on months of engagement with the MAS. So we as AMA, our members, we have been having conversations with the MAS about how we can sharpen Singapore's competitiveness.

11:11So the letter was really to provide a common point of reference because there's been a lot of conversations in the last few months. And some of that, I would say, go back years. The question then is how can we provide a common frame of reference to then build on those conversations. I think what the latter really does in addition to framing those conversations is to provide an operating reality of how our members are experiencing Singapore as they build businesses here, as they employ people, what are some of the operating realities that I spoke about beyond just mere aggregate data, which the MAS probably have or the Singapore government, and also to tie in with some of the broader issues around talent relocation decisions.

11:59I think we tried to make it personal. We said that when talent makes certain decisions, the broader family is involved. I think we have some members' accounts in the letter, which anonymize. So I would put it this way. The broader conversations run beyond just tax, but it looks at talent, immigration, the regulatory operating environment. And we also look at some new growth engines for Singapore. I think artificial intelligence was mentioned, private credit, tokenization, real assets. So we're very excited, I would say, super pumped over what's to come. I guess in terms of next steps, we're looking to have further conversations with MAS in a more structured fashion, perhaps bring more industry data to bear and support some of those conversations.

12:47So it's really framed around, as you say, strengthening the long-term competitiveness of the Singapore asset management industry rather than simply responding to developments elsewhere. We had a couple of months ago a conversation around Hong Kong and the tax changes that are taking place in Hong Kong. But without going through every recommendation, Kersheng, what are the two or three key policy areas that you believe would make the biggest difference to Singapore's competitiveness? okay uh i think the two or three areas uh just to summarize everything and i should make a note that the letter is on our website so any anybody who's on this podcast i probably will include a link in the show notes or you know you can just go to the email website have a look that would be great but two or three areas that make the biggest difference i think we touch upon individual taxation because i think based on our feedback conversations with members that's one of the most decisive lever for very mobile individuals.

13:53So portfolio managers, investment talent, they are the engine room. And that's a point that we made in a letter. Where they go, the rest of the teams, across trading, risk, technology, and operations might follow. So talent is mobile. Taxation does matter from an individual perspective. And when we say, when we look at how talent decides where to locate. We make the point letter that is really the total package. It's about a very important number, which is how much do you take home as compensation for you and your family beyond the headlines. I think that's a very important point. I think it's worth repeating.

14:37The other point is really about talent and immigration, and we urge the Singapore authorities to look at it as an overall competitiveness issue, rather than just a separate social policy question. Feedback from our members around work passes, pathways to permanent residency, for example, those issues have come up. And again, the other point that I think is quite a big part of our submission is around the operating environment, making sure the regulatory environment continues to be attractive for running a business in Singapore. And we urge the regulators in Singapore. And this is a message we carry all around the world, which is governments and regulators should periodically do a stock take of the rulebook.

15:24It's easy to add to the rulebook, but sometimes it's hard to retire any requirements that may no longer be as relevant today. So those are some of the key points that I think we made in the letter.

15:39Shipping, billing, admin, payroll, marketing. You're managing all the things, so why waste time sending important documents the old-fashioned way? Mail and ship when you want, how you want with Stamps.com. Print postage on demand 24-7 and schedule pickups from your office or home. Save up to 90 % with automated rate shopping. That's why over 1 million small businesses trust Stamps.com. Go to Stamps.com and use code PODCAST to try Stamps.com risk-free for 60 days. Your call has been forwarded to an automatic voice message system. A missed call doesn't feel like anything. No red flag, no notifications screaming at you.

16:18It just disappears into your call log. And nine times out of ten, that was someone ready to hand you money. That's why today's episode is brought to you by Quo, spelled Q-U-O. The business phone system built so you never miss a call. Here's what I like about it. All your calls, texts, and voicemails live in one place. so anyone on your team can pick up a conversation, see the full history, and respond fast. No more, wait, who talked to this customer last? And if you're worried about after-hours leads slipping through, Quo's optional built-in AI agent can answer questions and even book appointments while your team's offline.

16:54It's the number one rated business phone system on G2, and over 90 ,000 businesses already trust it to stay reachable. Money is on the line. Always say hello with Quo. Try Quo for free. Plus, get 20 % off your first six months when you go to Quo.com slash tech. That's Q-U-O dot com slash tech.

17:17Yeah, now, Kersheng, you are the author of this paper. But certainly, you know, I think it's fair to say the inspiration has also come from our members in terms of the content and the substance within. and we at AIMA only exist for our members' input and our members' engagement. Are these changes or proposals, rather, that you've raised in the letter, are these views that members have consistently raised with you or have they emerged more recently as the market environment has evolved? It's probably a combination of both. Obviously, some of those questions predate the current focus on regional developments.

18:09It goes back quite a few years. but I would say some of those issues have taken on a sense of urgency in recent months. I think you mentioned developments in Hong Kong, for example. So I think the key messages we have been conveying, our members have been conveying, is that there's a sense of urgency and that urgency is real and measurable. We talk about that in the letter. One of the considerations is around family and school calendar decisions. So if a particular fund manager or trader is based in a particular jurisdiction, you'll be measuring your relocation timeline in terms of months, not necessarily years.

18:51And we're certainly hearing feedback from certain members, not just in Singapore, but around the region and I would say around the world, looking at developments in Hong Kong with interest. So again, I think the urgency is there. We urge the MAS in our letter to provide early direction, a signal, even a hit of final details so that firms and individuals can weigh hiring, relocation decisions. And I think that's in Singapore's favor because we will buy Singapore time to think through some of the implications and the design well. And again, going back to my earlier point or some of my initial remarks about being deliberate, being mindful of how you think about some of those issues.

19:38And this latest development follows AIMA's recent engagement with policymakers in Hong Kong. Long, short listeners will recall episode 135 when we spoke to Darren Bolden, who's head of asset management and tax at KPMG China, who talked about AIMA and KPMG's involvement speaking to the authorities in Hong Kong by looking to secure benefits for the asset management industry including tax changes for participants across the asset management industry in Hong Kong. Kersheng, you would have an update on that. There have been some conversations, as I said, since the conversation we had with Darren. You've spoken to the authorities and can you take us through what has been happening there since?

20:31Of course. Since that conversation, a very comprehensive bill for capital interest and performance fees have been gazetted by the Hong Kong government in June of this year and is now on the floor of the Legislative Council. Expectations that it will pass and once that is enacted into law, It will be backdated to April 2025. Just as a recap, the scope of this bill is very ambitious and very broad. It goes far beyond private equity. So in a major windfall industry, hedge funds, private credit, and many other asset classes that our members are active in, including digital assets, will be in scope.

21:16So I would say the outcome is years of sustained industry engagement sit behind this process, including AMER's own submissions over many years. And it's a credit to the Hong Kong government and authorities for listening and moving decisively. Your other part of your question was, what are some of the lessons of that we can bring to Singapore? I would say there are two important lessons we can address, one of which is obviously patient advocacy pays off. And that usually is backed up by an evidence-led conversation. So it's not about just going and saying we want something or we need something as an industry, but backing that up.

21:54with the relevant arguments and the data and consulting widely across our membership and using AMA's members, the fact we have members in over 60 countries as a massive source of strength. And that's something we do consistently, having those conversations in public and private. I think lesson two is that I would tie this to what you said at the outset when we opened, which is the work we have been doing in the region and around the world, which is a stronger Hong Kong is good for Asia's alternatives industry because it helps Asia grow its share of the global alternatives market. So I would say well done, Hong Kong.

22:33It's a massive move for the region, but it's now Singapore's turn to ask itself the same question. How can it renew its value proposition on its own terms and on its own strength? Yeah, a real triumph, as you say, Kosheng, for Hong Kong and for the industry in Hong Kong really demonstrates what can be achieved through sustained engagement. And as Darren mentioned in our conversation with him, this was over a multi-year campaign between the industry and policymakers. But across your discussions with members, Kirsheng, what are the biggest factors that you see influencing where firms choose to establish and grow their business in the Asia-Pacific region.

23:24I think there are a few factors that sort of drive people's decision-making. I mean, we spend a lot of time talking about tax. Tax is a very important part of the overall framework, but it's not the only driver. when people decide where to site their teams and where to house their families or where to bring them along. I guess they tend to look at it more from a holistic, what I would say, a total package basis. So you tend to look at things like schools, residency, livability, safety. And I think the letter that we sent to the MAS talked about some of the softer frictions as well, trailing spouses where they can find employment.

24:12So these are some of the factors that internationally mobile families look at. There's also the other factor, which is that of looking beyond the headline rates. So looking at effective economics, the cost of doing business, cost of living, what that means for your firm and the individual. And of course, there's the operating environment. We touched on that in a letter as well, making sure the regulations are proportionate, predictable. and adapted for the industry that it serves. And increasingly, I think access to technology as well, whether you have access to compute, data and research, where does the entire stack live?

24:50Are you able to get your hands around some of that, especially with the coming wave of quantitative and AI firms? So those are, I think, all factors that people look at. But I would say people tend to look at it from a more holistic, total package basis. Agreed. brings into focus the work at AIMA. And, you know, talking about what's happening in Singapore and the wider APAC region, your work, Kirsheng, if we can just dwell on that for a moment. If APAC is to remain one of the world's leading regions for the alternative asset management industry, can you give us an insight into the role that organisations and what you do at AIMA plays and really helping all of that come together and the industry and policymakers working together for these better outcomes.

25:42Right. Our role as EMA, certainly my job, the way I look at it, working in close collaboration with our members is to keep showing up with the evidence. Showing up with the evidence to show policymakers how we can make Asia Pacific as a region flourish, how the different financial centers can maximize outcomes for the industry. So showing up consistently both in public and private for as long as it takes, because you said it was a, you mentioned earlier, it was a multi-year process. Certainly has been a long process, but sometimes advocacy takes time and I think requires a bit of patience. The other factor I would say is the importance of having some of those conversations.

26:28I would say with candle, candid conversation sometimes can be uncomfortable, but sometimes that needs telling in a polite, delicate manner, usually in private, sometimes in public. But I think as industry, we believe that in working with governments, policymakers, we can maximize outcomes and help our members achieve success wherever they choose to build their business. And I would just also add that I think the outcome in Hong Kong shows what sustained engagement produces over time. And I think that's an achievement we can all put our hands around and applaud and celebrate as an industry. Yeah, and the authorities and the regulators, both in Singapore and in Hong Kong, should be commended for their engagement with the industry in looking to make these changes.

27:22Ultimately, it is for the mutual benefit of the industry at large. talk us a little bit about the next steps let's say you put this letter in into the MAS and that has made press locally and then also been in the financial press as well so you've stirred up an emotion there and it's been a positive reaction but do you expect to hear anything more from the MAS or what are the next steps in this conversation? Yeah certainly I guess there are ongoing conversations we have been having with the MAS, our members having conversations with MAS, those conversations are taking place as we speak. I guess we can offer more updates when we can, because a lot of those conversations are private for the time being.

28:12For members who wish to get involved and do more, I guess the message that we carry from Singapore is for the time being, understand that Singapore is working on its own response. I think based on public statements by the MAS, they are actively starting a suite of measures. So no precipitous moves are necessary at this point. If you wish to get involved with what we do locally, please reach out to any member of the AMER team or reach out to me. The letter that we spoke about is on the AMER website. And also, if you wish to catch up on the action in terms of the tax reforms in Hong Kong, we did an AMA event, a seminar that we placed on a website.

28:54And I think the content is really amazing. We featured some of the best tax advisors involved with AMA. We've been working with AMA over the years on this tax reform. So I would urge people to catch up on the action there on the replay. Today's discussion has really shown that competitiveness, growth and competitiveness, isn't simply about one policy change. are one jurisdiction. It's really about creating the right environment for investment, innovation and talent to flourish. And so through our engagement across Singapore, a letter that you have authored, Kersheng, Hong Kong and the wider Asia-Pacific region, EIMA is committed to working alongside members and policymakers to help ensure that the AIPAC region remains one of the world's leading centres for alternative investment management.

29:52So if you'd like to learn more about EMA's work across APAC or read the letter that Kirsheng has talked about or our recent recommendations, please visit EMA.org. Kirsheng, thank you so much for joining us today. Thank you for all the work you do on behalf of your constituents in Singapore and the wider APAC region. and we look forward to hearing more from you in the future. Thank you for having me, Tom. Always a delight. The Long Short was brought to you by AMA, the Alternative Investment Management Association, the global representative for the alternative investment industry. As always, you can get the latest episodes by subscribing to The Long Short on Spotify, Apple Podcasts, Google Podcasts and Amazon Music or by streaming episodes directly from our website, AMA.org.

30:40Thanks for listening.

30:52We'll see you next time.

31:23We'll be right back.

31:43Every bit of potential revenue, go to shipstation.com and use code audio and get 30 days free. Finding ways to be financially savvy is a smart move. And knowing you could be saving money for the things you really want, like that dream home or new ride, is a great feeling. That's why the State Farm Personal Price Plan can help you save when you choose to bundle home and auto. Bundling, just another way to save with the Personal Price Plan. Prices are based on rating plans that vary by state. Coverage options are selected by the customer. Availability, amount of discounts and savings, and eligibility vary by state.