The Fund Management sector in Singapore is a mature market, and now caters to various types of investors and their specific needs. Fund Management today can primarily be grouped into External Asset Management, Public Market Fund Management and Private Market Funds.

External Asset Management focuses on tailored investment solutions for high net worth individuals and family offices. In this model, the regulated asset manager acts independently to the bank, the former being responsible for providing either discretionary or advisory services to the investor, free from the constraints of bank-driven products, whereas the latter is responsible for custody, execution and valuation of the investor’s assets.

Regulated assets managers that decide to run their own Fund vehicles, however, may prefer to do so where there is a multitude of investors that desire to participate in a similar strategy or product. This can be broken down into Public and Private Market funds.

Public Market Funds

Public Market Fund Management involves investors subscribing to Funds that in turn invest in publicly traded securities such as stocks, bonds and Exchange Traded Funds (“ETFs”). Public Market Funds have the following positive key attributes:

1. Significant liquidity: Most Public Market Funds invest in highly liquid securities that are easily tradeable on an exchange at any time during market-operating hours. This allows for a Public Markets Fund to easily take a position in a listed security if desired, or alternatively if it intends to divest its investments and hold cash, it could easily do so.
2. Transparency: Securities listed on tier-1 exchanges are usually subject to significant disclosures involving their track record, performance, financials, etc. in order to be listed – which allows for ease of the investment to be valued and determined comparatively against securities of a similar nature.
3. Valuation and Mark-to-market: Due to the transparent nature of data attributed to public market securities, the valuation of such securities can be easily tracked and monitored from multiple independent data sources.

However, there are significant cost considerations and additional pitfalls to look out for when managing a Public Markets fund.

Public Markets funds require significantly more day-to-day oversight than Private Market Funds for the following reasons:

1. With the added liquidity comes the ease of investors subscribing and/or redeeming more freely. This is also known as an “Open-ended” structure. Although some funds impose a minimum lock-in period for investors upon subscription, there are also a variety of funds that are daily or weekly dealing. This not only provides more complications when valuing the Fund (a function usually carried out by the Fund Administrator) but also provides for greater AML/CFT risks.                                              
2. A Public Markets Fund vehicle, being its own legal entity – should have the requisite counterparties to assist with its operational needs, summarily as follows:
   

   • Fund Administrator – to help with the Fund’s AML/CFT onboarding obligations and Fund accounting.
   • Custodian – to hold the Fund’s assets (e.g. a bank could be the Fund’s cash custodian)
   • Broker – to assist with the Fund’s trade executions.

3. As Public Markets investments are highly regulated, Investment Managers here are subject to more stringent conduct requirements. Greater scrutiny around potential conflicts of interest can arise, in relation to:
   

   • Personal account dealing
   • Insider Trading/Window Dressing/ Market Manipulation (to name a few market offences)
   • Fair and Equitable Dealing
   • Broker Allocations (and Gifts received/given to such counterparties)

Private Market Funds

Comparatively, Private Market Funds involves investors subscribing into Funds that in turn invest into non-publicly traded assets. Private equity, venture capital, real estate and infrastructure projects are examples of such assets types (note: for Singapore purposes, third party investment management into real estate and infrastructure projects alone does not constitute substantive fund management activity as such asset classes do not fall within the definition of “Capital Market Products” under the Securities and Futures Act.)

Private market funds have the following attributes:

1. Illiquid: Most Private Market funds invest in illiquid, privately held assets, and therefore the fund life of such Funds are significantly longer than Public Market Funds, sometimes stretching up to 5-10 years.
2. Less Counterparties: Private Market funds (e.g. Private Equity) don’t normally require a separate custodian or broker to help the Investment Manager carry out its operational requirements, though in many instances an independent valuer is required to assist with the objective valuation of a private asset.
3. Less Transparency: Private investments are more difficult to be valued objectively, as different assets are subject to different circumstances that may add to or negate from their value. Without sound fundamentals to objectively and professionally value a private asset, it is easy for Investment Managers to deviate significantly from the real value of such an asset.
4. Higher Risk-Reward Ratio: Due to the points above mentioned, Private investments are more likely to generate larger gains for investors, though also more likely to generate larger losses as well – as compared to public market investments (note: in certain circumstances of significant market volatility, the converse may be true).

However, with the longer tenors of Private Market Funds, this alleviates the responsibilities imposed on their Investment Manager(s), for example:

1. Private Market Funds are considered “Close-ended”. This means that the Fund is set up for a particular investment, and once the initial group of investors have subscribed, they are locked in for the life of the Fund and will only be able to redeem their proceeds upon the Fund-life cycle expiring and the Fund disposes of its assets and is wound up.
2. AML/CFT concerns are reduced here as there is less variation in the investors of the Fund, once subscribed. After a Private Market Fund has onboarded its investors and reached its target AUM amount, the Fund then closes and no new investors are onboarded thereafter.
3. While the regulatory obligations of a Private Markets Fund Manager are not dissimilar to that of a Public Markets Fund Manager, the practical implications are significantly lower. Conflicts of Interest arising from Personal Account Dealing or Market Sensitive Information are less likely to occur. Public Market investment rules do not apply to Private Market investments (Note: Unless a publicly listed company owns a private asset to which the Fund is investing into)

The table below provides a good summary of the points discussed above:

Feature	Public Market Funds	Private Market Funds
Liquidity	High (assets can be bought/sold on exchanges)	Low (assets are illiquid, long investment horizons)
Transparency	High (frequent reporting and public disclosures)	Low (limited reporting, private investments)
Risk and Return	Lower risk, stable returns, moderate growth	Higher risk, higher potential returns
Compliance Requirements	More regulatory burden, subject to the Exchange’s Rules on Conduct	Less stringent regulatory oversight, often more flexible
Investment Horizon	Short to medium-term	Long-term (5-10 years or more)

Conclusion: Both Public and Private Market Fund Management comes with their own nuances. It is important for a regulated Singapore Fund Manager that intends to expand its investment strategy to understand in detail the intricacies of running these strategies. 

Partner with Curia Regis for Strategic Investment Solutions At Curia Regis, we provide tailored regulatory compliance support for Regulated Fund Managers looking to expand their offerings. Let us help you navigate the complexities of setting up and building out your internal infrastructure to provide for your expanded product suite, to the benefit of your clients. Reach out today to discuss how we can assist you in making informed investment decisions.

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