The latest report report by the regulator shows the industry was driven by 17% year-on-year growth in the alternatives sector, which includes private equity, venture capital, hedge funds, real estate and real estate investment trusts.
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However, the 2016 increase in alternative assets is lower compared to the previous year. In 2015, alternatives assets increased by 29%, while traditional asset managers only saw their assets increase modestly by 4%, according to the regulator’s Singapore 2015 asset management survey.
Industry sources have previously highlighted the importance of alternatives in client portfolios.
For example, Roger Bacon, head of investments for Asia-Pacific at Citi Private Bank, said in a previous interview with our sister publication Fund Selector Asia that although hedge funds haven’t delivered on their promises, they play an important role in a diversified portfolio. He added that client interest is increasing. He noted that private equity and real estate are asset classes Citi’s clients find attractive, provided there is an acceptable level of transparency and liquidity.
Johan Jooste, Bank of Singapore’s chief investment officer, also believes that private equity and hedge funds offer diversification in a balanced portfolio. Investors are better off diversifying with these alternatives rather than holding cash and waiting for the market to present attractive opportunities.
Echoing Jooste, James Cheo, BoS’ investment strategist, said that hedge funds in a client’s portfolio can reduce volatility or act as a portfolio diversifier.
A majority of Asian institutional investors are also considering increasing alternative investments, according to a Natixis Global Asset Management survey report published in March.
Separately, the MAS noted in its annual report that around 78% of Singapore’s total assets in 2016 were sourced from outside Singapore.
According to the 2015 asset management survey report, 56% of the total AUM came from Asia-Pacific, 18% from North America and 17% from Europe.
From a private banking perspective, Singapore, as well as Hong Kong, have become the fastest growing offshore centres globally because of their status as preferred booking centres for regional clients, according to The Boston Consulting Group’s 2017 wealth report.
The compounded annual growth rate for the period 2016-2021 of offshore wealth in Singapore is around 8%, which is higher compared to the US, UK and Switzerland, which is around 3%-4%. The Lion City managed around $1.2trn of offshore wealth in 2016, according to the report.