As asset management becomes an increasingly globalised business, the Monetary Authority of Singapore has reviewed and enhanced its supervisory toolkit to cope with the growing complexities.

With new entrants and business models within the asset management space, the Monetary Authority of Singapore (MAS) saw the need to be responsive to new and emerging risks. 

«Furthermore, asset management is increasingly a globalised business. New rules and regulatory developments elsewhere will impact fund managers here, and shape the way they operate,» said Lim Cheng Khai, executive director of MAS' Capital Markets Intermediaries Department II, in his opening address at the Investment Management Association of Singapore's 6th Regulatory Roundup Forum. 

Constant Review

«All these demand that MAS regularly review and enhance our supervisory toolkit to cope with the expanding breadth and depth of our asset management industry, and monitor fund managers’ conduct and compliance with evolving rules and regulations,» Lim said. To this end, the regulator listed five ways to cope with the evolving landscape: (i) structure, (ii) risk-based approach, (iii) supervisory tools, (iv) industry engagement, and (v) investor education.

First, MAS has structured itself into supervision teams focusing on various sub-sectors of the industry. This enables the regulator to build up a body of knowledge in understanding new business models and evaluating attendant risks. 

Sharpening Its Risk-based Approach

Second, it has redefined and sharpened the definition of «risk-based» approach, traditionally applied to larger financial institutions with retail reach. By assessing individual fund managers with top-down identification of risk themes, it seeks to shine the light on practices or managers that may have received less attention in the past, through the aid of data analytics.

«Given the growing number of fund managers operating in Singapore, we need to be alert to potential risks or conduct issues that may not have a widespread impact if they had taken place in one or two small managers, but can cause significant investor harm if they occur across a large number of managers,» elaborates Lim. Singapore has over 800 fund management companies last year.

Using Data And Text Analytics 

Third, MAS has deployed various supervisory tools including data analytics to help it identify unusual trends or flag outliers in fund managers and funds. It also plans to use text analytics to help it analyse the financial statements and audit reports of fund managers more effectively, and redirect supervisory resources to following up on unusual trends or anomalies. 

«In recent years, MAS has conducted more targeted thematic reviews, covering a larger number of fund managers that are selected based on the outcome of our analytics. And we draw from fund managers that might not have the largest assets under management, but nonetheless posed higher risks than other larger peers based on other risk metrics that we analysed. My colleagues also deploy data analytics tools to help us narrow down specific transactions for review,» Lim elaborates.

Growth In Asia Pacific

Fourth, the regulator will engage with fund managers on an industry-wide engagement session so as to foster a well-informed industry regarding the regulatory environment. Lastly, it will continue to support financial education efforts so as to empower consumers to look after their own financial security. 

Despite downward pressure on fees plus the ongoing push for more transparency across fund managers, Asia Pacific remains the bright spots for global investors and funds. Assets under management in Asia Pacific is projected to grow faster than any other region globally, from USD15 trillion in 2017 to almost USD30 trillion in 2025, according to a recent report by PWC.