MAS Macroeconomic Review confirms weaker net fees and commissions amid tariff-driven volatility and tightening financial conditions.

Global Trade Tensions and Financial Conditions Tighten in 2025

On 2 April 2025, the United States imposed reciprocal tariffs of at least 10% on nearly all trading partners, with Singapore subjected to the baseline rate. A 90-day pause on higher-band tariffs announced on 9 April provided temporary relief, but uncertainty persisted as exemptions remained limited and trade policy direction remained opaque (Source 5: MAS Macroeconomic Review, Apr 2025). The tariff shock cascaded through global financial markets, triggering broad-based volatility spikes that directly affected Singapore's financial sector.

The IMF's 2025 Article IV consultation notes that after easing through 2024, financial conditions in Singapore tightened sharply in April 2025, driven by widening corporate and sovereign debt spreads and heightened risk aversion (Source 7: IMF Article IV, 2025). This tightening occurred even as domestic interest rates continued their downward trajectory. The 3-month compounded Singapore Overnight Rate Average (SORA) declined from 3.6% in August 2024 to 2.5% in April 2025, largely mirroring US rate movements. The divergence between falling policy rates and tightening financial conditions created an unusually challenging operating environment for fund managers, who faced rising hedging costs and diminished risk appetite among institutional and retail investors alike.

SORA Rate (%)Source: Orionmano Industries

The MAS Macroeconomic Review explicitly links the tariff-driven volatility to subdued financial sector performance, noting that spikes in volatility across financial markets triggered by fast-evolving trade tensions were expected to dampen net fees and commissions in the fund management, forex, and security dealing segments (Source 5). This macro-level assessment provides the analytical foundation for understanding the fee income pressures that materialised over the first half of 2025.

Fund Management Fees Growth Subdued Amid Market Volatility

The MAS Macroeconomic Review, published in April 2025, confirms that net fees and commissions of fund managers and banks grew at a "more subdued pace" during the review period (Source 5). The primary drivers cited were broad-based selling pressure and sharp valuation losses across equity and fixed-income markets, which compressed the asset bases from which management fees are typically calculated.

The Review further warns that if investors shift toward more passive investment strategies in response to persistent volatility, weaker trading activity would further constrain fund management revenues. This structural shift, if sustained, would compound the cyclical headwinds already facing active managers in Singapore (Source 5). The data suggest that the fee income compression was not limited to a single asset class or strategy type; rather, it reflected a systemic retrenchment in risk appetite across the financial ecosystem.

Domestic credit intermediation remained tepid, reinforcing the picture of cautious financial conditions. Private credit growth registered just 2.6% year-on-year in the third quarter of 2024, the most recent period for which comprehensive data were available at the time of the IMF assessment (Source 7). While lending activity had exited contractionary territory in prior quarters, the MAS observed signs of near-term plateauing in its recovery (Source 5). For fund managers, the constrained credit environment limited opportunities for private credit strategies and alternative asset deployment, which had been a growing revenue stream in prior years.

MAS Responds with Regulatory Revisions and EQDP Allocation

In response to the subdued environment, the Monetary Authority of Singapore has pursued a dual-track strategy: tightening regulatory safeguards for licensed fund management companies while simultaneously deploying capital to stimulate domestic equity activity.

On 23 April 2025, MAS Managing Director Chia Der Jiun announced a formal review of the liquidity risk management framework applicable to licensed fund management companies (LFMCs). Speaking at the annual Investment Management Association of Singapore Investment Conference, Mr. Chia stated that the review aims to enhance the resilience of Singapore's fund management industry in both normal and stressed market conditions (Source 2: Sidley, Jul 2025). The initiative aligns with calls from the Financial Stability Board and the International Organization of Securities Commissions to reinforce consistency between a fund's investment strategy, liquidity profile, and redemption terms. MAS has indicated it will engage the industry on any proposed changes when ready (Source 2).

Concurrently, MAS proposed removing existing exclusions from product advertisement rules, requiring that all LFMCs comply with advertising standards regardless of their target audience—including exemptions previously available for offerings to institutional and accredited investors (Source 2). This regulatory tightening signals MAS's intent to enhance investor protection and market integrity as the fund management landscape evolves amid stress.

On the developmental front, MAS announced in July 2025 that it had set aside S$1.1 billion from the Equity Development Programme (EQDP) for the first batch of three appointed asset managers. An additional S$50 million has been committed through end-2028 to strengthen equity research coverage and product listings in Singapore (Source 6: MAS, Jul 2025). The EQDP allocations represent a targeted intervention to deepen domestic capital markets and support the ecosystem for equity fund managers, partly offsetting the cyclical headwinds from global trade tensions.

Outlook: Persistent Headwinds for Singapore’s Fund Management Sector

The outlook for Singapore's fund management sector through the remainder of 2025 and into 2026 remains subdued, with multiple indicators pointing to continued pressure on fee income.

The IMF's adverse scenarios for Singapore assume that higher tariffs, heightened uncertainty, and tighter financial conditions will weigh on exports, investment, and consumption both globally and domestically. In both adverse scenarios modelled, Singapore's financial sector could come under further pressure from a tightening of global financial conditions, leading to higher foreign exchange borrowing costs, reduced cross-border capital flows, and a worsening in credit quality (Source 7). The IMF explicitly notes that liquidity support to banks may be needed if the shock deepens, and that macroprudential policies should be adjusted to safeguard financial stability.

MAS's ongoing liquidity risk management review, combined with the broader regulatory tightening, suggests that compliance costs for fund managers will rise even as revenue growth remains constrained. The withdrawal of exemptions for institutional and accredited investor offerings may further increase operational burdens for LFMCs (Source 2). While the EQDP capital injections provide a modest offset for equity-focused managers, they are unlikely to meaningfully alter the trajectory of a sector facing headwinds from trade policy, valuation compression, and structural shifts in investor behaviour.