Monetary Authority Of Singapore Issues Guidelines On Hedge Funds

by Carla Johnson, Investors Offshore.com

18 June 2001

In response to interest expressed by the financial industry, the Monetary Authority of Singapore (MAS) issued new guidelines last week which will allow hedge funds to be sold to the public. The guidelines will provide for more investment choice by making investors aware of the higher risks associated with the prospect of significantly higher returns from such funds.

The key requirements for public offers of hedge funds include: a minimum initial subscribption of $100,000 per investor; adequate and prominent disclosure in the prospectus of the high risks of investing in hedge funds; and, investment managers and/or investment advisers of hedge funds must have expertise in managing such funds.

In explaining its rationale for issuing the guidelines, the MAS released a statement explaining: 'Hedge funds differ significantly from traditional retail funds. For instance, hedge funds may leverage significantly or sell short to improve performance. They may also use derivatives more extensively and invest in higher-risk instruments. In recognition of their more aggressive investment strategies, MAS has put in place specific guidelines to govern offerings of such funds.'

The MAS announcement follows the news reported last week on the decision of the Hong Kong Securities and Futures Commission to hold consultations on opening hedge fund investment vehicles to sophisticated retail investors.

Last month, Investors Offshore reported on a major hedge funds conference that took place in Hong Kong which highlighted the unpopularity of hedge funds among Asian investors compared to their US and European counterparts. Many analysts have predicted that the cautious attitude of many Asians towards the hedge fund industry is about to change in the region and with this recent news from Hong Kong and Singapore it looks like things could be looking up for the industry in Asia.

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