Singapore has launched its latest response to Hong Kong’s aggressive efforts to attract hedge fund managers and other financial professionals, proposing tax exemptions on certain investment profits as the two Asian financial centres compete for an industry worth more than US$5 trillion in each city.
On Wednesday evening, leading financiers gathered at a Sofitel Hotel ballroom for a closed-door discussion with Chee Hong Tat, the Monetary Authority of Singapore’s deputy chairman. The meeting came just hours after Singapore announced measures designed to strengthen its appeal to asset management firms and counter Hong Kong’s increasingly aggressive tax incentives.
Hong Kong has spent months courting prominent figures in money management, including through legislation that would erase levies on carried interest, potentially saving high earners millions of dollars a year. Singapore’s latest proposal could potentially go even further, according to the details released by the authorities.
The announcement triggered immediate activity among Singapore’s fund managers. People familiar with the matter said WhatsApp groups were flooded with discussion while companies and individual portfolio managers contacted tax consultants to assess the potential impact. Some managers who had been considering moving operations and senior employees from Singapore to Hong Kong are now reconsidering those plans.
The Singapore proposal would exempt a share of profits earned by fund managers and investment professionals when they deliver “strong returns” for investors in qualifying funds. The precise rules, however, remain unclear, with Chee telling finance leaders that more details would be announced at the next annual budget, which typically takes place in February.
The uncertainty means the competition between the two financial centres is far from settled. Fund managers at multi-strategy firms, known as pod shops, are particularly interested in whether the proposed exemption would apply to individual investment pods or only to profits at the overall fund level. The distinction could be significant for a rapidly expanding segment of the hedge fund industry typified by Millennium Management and Balyasny Asset Management.
The measures have nevertheless already influenced decisions by some professionals. With applications for international schools in 2027 often closing by November, portfolio managers with families face imminent decisions over whether to relocate. Suhaimi Zainul-Abidin, chief executive officer of Singapore-based Quantedge Capital Pte, which managed US$7.2 billion as of July, said the announcement gave people a reason to pause and wait for further details.
Singapore is also planning a new hedge fund investment programme intended to anchor managers in the city-state. Experts expect it to echo the Equity Market Development Programme, which is placing S$6.5 billion with investment firms willing to increase purchases of Singapore-listed stocks.
The city-state is also loosening some income requirements for its Overseas Networks & Expertise Pass visa programme. For senior executives in asset management, the previous requirement for a base salary of S$30,000 a month could now incorporate other forms of income, an important change in an industry where compensation is often driven by bonuses.
The measures could encourage fund managers to bring parts of their tax structures back to Singapore. Thomas Kim, partner at Hogan Lovells Cadwalader, said managers could consider moving carried-interest vehicles onshore to benefit from the exemption, potentially strengthening Singapore’s asset management industry.
Yet the competition raises a broader question about the consequences of increasingly generous tax treatment for the financial elite. Patrick Yip, a tax adviser at Karas So LLP, warned that further cuts could become “a race to the bottom” that may not produce sound tax policy for either city.
The contest between Singapore and Hong Kong is therefore no longer simply about attracting companies. It is increasingly a competition for the people who manage capital, the profits they generate and the tax revenues governments are prepared to forgo to keep them. For Singapore, the immediate objective is clear: prevent Hong Kong’s tax offensive from turning a financial rivalry into a talent exodus.
