SC: Foreign exempt schemes framework to allow foreign fund operators to lodge and launch funds here to be launched by year-end

The Securities Commission (SC) said foreign fund operators will soon be able to lodge and launch funds here for high net worth entities and institutional investors under a "foreign exempt schemes" framework to be launched by the end of the year.

SC managing director Kamarudin Hashim said the framework will allow foreign fund operators that are a related corporation to a SC-licensed fund manager to lodge and launch their foreign funds. 

He added that the framework will add greater diversity to the onshore fund options in the domestic capital market, as well as expand the scope of product offerings for fund managers. 

"While the first phase of this framework will be targeted at institutional investors and high net worth entities, the SC is also reviewing the next phase of liberalisation to include high-net worth individuals (HNWIs) whilst ensuring controls are in place for parity between domestic and foreign fund managers."

"This will require close consultation and engagement with industry stakeholders, which we envision to take place in 2024," Kamarudin said during his keynote address at the "International Institutional Investor Series 2023 Beyond the Norm: Embracing New Opportunities for Resilient Returns" event. 

He said there is a need to increase investor inclusivity by widening access to investment options that will allow investors to pursue greater diversification and higher yields, as highlighted in the SC's Capital Market Masterplan 3 (CMP3). 

He elaborated that aside from assessing net worth, certain jurisdictions have considered the level of investor knowledge and sophistication, alongside financial capacity to enable greater participation of investors with varying financial needs. 

Moving forward, Kamarudin said the SC will also widen the sophisticated investor base by providing flexibilities within the calculation of HNWI threshold. 

He said this will be done by expanding the qualification criteria of sophisticated investor to account for their knowledge and experience as well as extending angel investors' participation in other capital market products beyond the private markets and micro, small and medium enterprises (MSMEs) space. 

Kamarudin noted that this would ensure that investors are categorised accurately, which helps provide them with the appropriate level of regulatory protection and facilitate capital formation. 

On a separate note, Kamarudin said a sequence of macro stress tests on unit trust and wholesale funds to evaluate liquidity risk found that even under extreme scenarios, fund managers have in place the necessary risk management processes and sufficient liquidity to manage redemptions in an orderly manner. 

"This again is testament that the industry remains resilient and is well equipped to meet investor needs even in the unlikely scenario of extreme redemption pressure. 

"With sound and good liquidity management practices, fund managers are well-placed to increase focus on growth, development and expansion into newer areas of investors' interests such as foreign funds and sustainable investments," he said.