Value funds based in Singapore?

[andrefre]

Hi d.o.g,

What are your thoughts on using the "investment holding company" to build a track record in the expectation of starting a fund in a few years?

Sure, one won't be able to raise money from investors, but is this a good way to build a track record on a smaller capital of say $1-2mn? After 3-5 years, one can properly set up a fund and take in outside capital.

Thanks for your advice!

Since the interest rate is pretty low, a fixed 3% interest rate should attract fund and typically, it is not difficult to get 3% annual return for good investors.
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I did that before for a relative but no IOU was issued though.

Once you enter into a contract (whether verbal or written) to manage money for others (whether friends, relatives or strangers), you enter into the realm of fund management. If MAS comes knocking for whatever reason and there is evidence that you are managing money without a license/registration, you may face legal action.

And remember that people seldom complain when things are going well. In the capital markets, nothing is for certain and if you have a run of bad luck you could end up severely out of pocket. It may only be annoying if the amount is small compared to your net worth, but if the amount is too large to pay back you could be in big trouble if the relative complains to MAS. Even if the relative does not complain formally, you may find yourself ostracized at family gatherings until such time that you can make good all the losses.

I am not trying to scare anyone, but the law is what it is. Very inconvenient for those trying to raise money and build a track record, and for those simply trying to help people they care about.

The US actually makes exemptions for immediate family and employees to invest in a manager's fund, but in Singapore no such exemptions exist. The "individual managing for immediate family members" exception was removed when the laws were changed and fund management was restricted to companies only. The "employee investment" exception was requested by industry participants, but denied by MAS.