As Singapore hedge-fund assets swell to $59 Billion,

will the city-state have enough room for more investments?

Hedge-fund assets in Singapore more than doubled to about S$80 billion ($59 billion) at the end of last year, contributing to a 32 percent growth in the city's asset management industry, the central bank said.

The number of hedge-fund managers increased by more than 50 percent to almost 300 at the end of 2007, the Monetary Authority of Singapore said in its annual survey of the city's asset management industry.

“The profiles and investment strategies of the hedge fund managers in Singapore are highly varied and diverse,” the central bank said.

Singapore has sought to transform the island into a center for hedge funds by offering tax incentives and making it easier for them to obtain licenses than other Asian cities such as Hong Kong and Tokyo.

Total assets managed by Singapore-based managers rose to S$1.17 trillion, from S$891 billion at the end of 2006, the seventh consecutive year of “double-digit” year-on-year growth, the central bank said.

About 86 percent of the total assets last year were sourced from overseas, almost half of which came from the Asia-Pacific region. Managers allocated about 57 percent of the total assets into equities and 12 percent into alternative investments such as hedge funds and private equity, two percentage points higher than in 2006, the central bank said. Investments in bonds fell five percent to 12 percent of all assets.

The number of firms managing more than S$5 billion in assets increased 23 percent last year, and accounted for 47 percent of the total assets in the city state.
The number of investment professionals, including portfolio managers, traders and analysts, rose 22 percent to 2,185, the central bank said.


Will Singapore ever reach an “investment saturation point”? What may or may not cause this?

Will Legg Mason's new fund stand out in Asia's lucrative bond market?

Legg Mason, the Baltimore-based money manager that oversees about $950 billion, began selling an Asian bond fund in Hong Kong that seeks to profit from regional economic growth and currency appreciation.

The Western Asset Asian Opportunities Fund targets to beat the HSBC Asian Local Bond Overall Index by an average 1.5 percentage points annually “over the course of a market cycle,” said a company statement. Rajeev De Mello will lead a team at Legg Mason unit Western Asset Management overseeing the fund.

“The Asian bond market is currently the world's fourth-largest and still growing at a rapid rate,” De Mello said in the statement. “Strong economic fundamentals, favorable development in instruments and infrastructure, and structural appreciation of the region's currencies are making local bonds an attractive asset class.”

Investors are moving money out of equities and demanding higher yields on bonds after the worst housing crisis to hit the U.S. since the Great Depression led to falling share prices and over $420 billion in writedowns and losses at financial firms globally. The HSBC Asian Local Bond Overall Index yielded 5.525 percent on July 16, rising from 5.116 percent at the end of 2007.

The fund will invest at least 70 percent of its total assets in debt securities issued by Asian governments and companies as well as derivatives on Asian interest rates and currencies, said a marketing document. Asia is home to the two fastest-growing major economies, China and India.

The fund will focus on local-currency investment grade, dollar investment grade and high-yield credit, and may also buy unrated debt to boost returns, the statement added. Its investments may include asset-backed and mortgage-backed securities, the marketing material said.

Legg Mason began managing Asian local-currency bonds in 1994. Western Asset Management's $508 billion fixed-income assets make it the third-largest U.S. manager of bonds. The Western Asset Asian Opportunities Fund has also been sold in Europe, including the U.K., and Singapore.

What do you think should future Asia-focused funds offer in order to maximize yields and survive the competition in the region?

Is Nomura implementing stricter rules after the ban?

Nomura Holdings resumed broking services for Japan's public pension fund, the manager of more than $1 trillion of retirement assets, after a three-month ban following allegations of insider trading at the securities firm.

Government Pension Investment Fund lifted its ban on July 9 after Nomura, Japan's biggest brokerage, submitted a report to regulators detailing how it will improve internal controls, said Kouichi Nojima, a councilor at the fund, in a telephone interview.

Nomura lost some broking mandates from Japanese asset managers after a former employee at its mergers and acquisitions department was arrested in April on insider trading charges.

The Tokyo-based company is among the top third of brokers regularly used by the fund for trading securities including Japanese government bonds and corporate bonds, said Seiichi Kusakabe, the fund's head of in-house trading.

Japan's Financial Services Agency ordered Nomura to improve internal controls and compliance on July 3.

The Tokyo District Public Prosecutors Office arrested Li Yu, a former Nomura employee, and two other Chinese citizens in April. Li was charged with insider trading, prosecutors said in June. Nomura fired Li, the brokerage said at a press conference on April 22.

Japan's Pension Fund Association, which manages 13.2 trillion yen of retirement assets, also said in April it would stop placing stock-broking and bond-trading orders through Nomura until the regulator completed its probe and Nomura demonstrated its compliance with regulations.

The association's officials declined to comment if it resumed its trading or not.

How could Nomura's operations be affected by this issue?

Will Japan become Asia's Pied-piper of green energy?

Japan will increase yen loans and investment in clean-energy technology to help cut greenhouse emissions in China and India, Asia's two economic powerhouses.

The Japan Bank for International Cooperation, the government's main overseas lender, said the investment is part of the $12 billion in loans and grants Prime Minister Yasuo Fukuda has promised to spend in five years to tackle climate change.

“We have to focus on major developing countries, and as a financer we are going to put more and more money into private-sector investment in these countries, not only by lending but also by equity financing,” Takashi Hongo, director-general of environment finance at JBIC, said in Tokyo. Hongo declined to say how much money the bank has set aside for the projects.

Japan, together with the World Bank, the U.S. and the U.K. plans to raise a $5.5 billion fund to help poor nations develop clean technology. Finding ways to convince developing countries to agree to emissions targets is likely to be a focus of the Group of Eight industrialized nations summit in Japan's northern island of Hokkaido next week.

“We are proposing to utilize multi-governmental funds as a tool to mitigate investment risks in developing countries and boost capital spending by private companies on clean projects,” Hongo said. The fund “should be used as a kind of catalyst to attract private money.”

Carbon Underground

Environment ministers of the Group of Eight rich nations in May also vowed to raise a pool of money to develop technologies that would help them meet a goal of halving global emissions blamed for global warming by 2050.

Hongo named carbon-capture-and-storage technology, in which carbon-dioxide is caught in the air and stored underground, as “the key” to reaching the emissions-cutting goal. G-8 energy ministers last month agreed to jointly develop carbon capture by 2020 and launch 20 large-scale demonstration projects by 2010.

In May, China and Japan said they would cooperate in using the technology to inject carbon dioxide into oil wells to both store the gas and to make the crude more viscous, so it can be pumped faster. The countries are expected to use the method at China's Daqing offshore oil field.
G-8 leaders want to reach an agreement when they meet next week that will lay the groundwork for a successor to the 1997 Kyoto treaty on climate change. About 180 nations are meeting through 2009 to negotiate the accord, due to be signed in Copenhagen next year.

The Kyoto agreement requires its 37 signatory nations to cut emissions by a combined 5.2 percent from 1990 levels by 2012. China and the U.S., the two biggest emitters, aren't subject to any targets. The U.S. rejected Kyoto as being unfair because it set no emission cuts for developing nations.

Will Japan's initiative be welcomed by developing countries with open arms?