MAS launches liquidity risk review and tightens VCC manager requirements amid weaker global market conditions.

The Monetary Authority of Singapore's decision to review liquidity risk management rules in April 2025 underscores the subdued activity in the city-state's fund management sector, which faces headwinds from volatile global markets. The review, announced by MAS Managing Director Mr. Chia Der Jiun at the annual Investment Management Association of Singapore Investment Conference on April 23, aims to enhance the resilience of Singapore's fund management industry in normal and stressed market conditions. It also aligns with calls from the Financial Stability Board and the International Organization of Securities Commissions to reinforce consistency between a fund's investment strategy and liquidity with its redemption terms.

Subdued Activity Amid Global Headwinds

The fund management segment saw more subdued activity in 2025, reflecting weaker global market conditions. Industry indicators point to a cautious environment shaped by policy uncertainty and a prolonged period of elevated financing costs.

AllianceBernstein’s 2025 market outlook, published in January that year, highlighted the effect of new U.S. policies on global markets, introducing additional uncertainty for asset allocators. The broader macro environment has weighed on transaction activity. A KPMG survey of more than 100 U.S. asset managers—a bellwether for global sentiment given Singapore's interconnected fund management ecosystem—found that 55% of respondents cited stable market conditions and 54% cited reduced financing costs as the key signals needed for a favorable transaction environment.

Despite persistent headwinds, a separate Capgemini survey of 2,500 senior executives across 17 countries and nine industries found that 62% of large organizations remained optimistic about their growth prospects for 2025, up from 56% in 2024. However, the report noted a cautious view of the broader global economy, reinforcing the contrast between corporate confidence and the measured tone of asset managers.

Share of respondents (%)Source: Orionmano Industries

Regulatory Response: MAS Reinforces Liquidity Risk Management

MAS has taken concrete steps to tighten oversight. The liquidity risk management review announced in April 2025 is a central pillar of this effort. According to a July 2025 regulatory update published by Sidley Austin, the review aims to re-examine the current liquidity risk management framework applicable to licensed fund management companies (LFMCs). The review's stated objective is to enhance industry resilience in both normal and stressed market conditions, responding directly to concerns that some funds may carry liquidity mismatches between their investment portfolios and redemption terms.

Simultaneously, MAS is scrutinizing Variable Capital Company (VCC) managers to enforce "substantive fund management activity." Under MAS's clarified expectations, a VCC manager must be actively involved in all aspects of investment and risk management, including portfolio construction, investment due diligence, and analysis. The regulator has warned against three specific practices: (i) providing a conduit for customers to structure investments in the form of fund units without substantive input or influence over the merits of the investments, (ii) setting up VCCs that merely serve as a conduit for funds managed by other fund managers, and (iii) purely engaging in marketing of the VCC.

These measures reinforce MAS's broader strategy to position Singapore as a "leading fund domiciliation hub," a goal it has pursued since launching the VCC framework in January 2020. As of the latest MAS data, Singapore manages S$5.4 trillion in assets under management and hosts 1,250 registered and licensed fund managers. Ensuring that VCC managers actually perform substantive functions in Singapore is critical to maintaining that hub status and preventing regulatory arbitrage.

Manager Adaptation: 'Going Glocal' and Expanding Retail Access

Fund managers are responding to the tougher environment and heightened regulatory scrutiny through strategic adaptation. At SuperReturn Asia in July 2025, Minister of State Mr. Alvin Tan—also a Board Member of MAS—encouraged managers to adopt a "Going Glocal" approach: deepening capacity locally while adapting strategies for regional markets. The framework calls for asset managers to build substantive local teams and infrastructure in Singapore as a base for expanding across Asia-Pacific, rather than using the city-state solely as a booking center.

MAS has also moved to broaden retail investor access to asset classes traditionally reserved for institutions and accredited investors. In July 2025, the regulator released proposals to authorize Long-Term Investment Funds (LIFs), which would allow retail investors to access private equity, private credit, and infrastructure investments. Under the proposed framework, a MAS-authorized LIF can take the form of either a direct fund making private market investments or a long-term investment fund-of-funds (LIFF) that invests primarily in private market investment funds. The LIFF structure benefits retail investors by leveraging the manager's expertise in selecting and monitoring underlying funds, providing greater diversification than a single direct fund.

The retail access initiative dovetails with broader shifts in the region's wealth management landscape. According to Capco's Asia-Pacific Wealth Management Trends 2025 report, the region is experiencing a greater flow of offshore clients and wealth into centers such as Singapore, alongside the ongoing transfer of wealth to a younger generation. The report notes that "clients will assess their wealth management provider in terms of how rapidly and effectively they can respond to their individual needs, preferences and behaviors, including when markets are in flux." For fund managers, the combination of retail access to private markets and the flexibility demanded by HNW and transitioning-affluent clients creates both opportunity and operational complexity.

Outlook for 2026: Cautious Positioning

The sector's 2026 trajectory will depend on global rate trends and the effectiveness of MAS's liquidity framework enhancements in restoring confidence. The wealth management trends identified by Capco—emphasizing flexibility and technology adoption to cater to changing client needs during market flux—are likely to persist. Managers that invest in robust operational infrastructure and compliance capabilities ahead of the new liquidity rules may gain a competitive advantage.

On the regulatory front, MAS has signaled it will engage the industry on changes to the liquidity risk management framework when it is ready to do so. The outcome of that engagement will be closely watched by the industry, as it will set the parameters for fund structuring, redemption terms, and risk management practices for years to come. Firms that were using the VCC conduit model without substantive activity face a particularly sharp adjustment.

The broader macroeconomic picture remains uncertain. The KPMG survey data suggests that asset managers are waiting for clear signs—stable market conditions and reduced financing costs—before committing to increased transaction activity. If global interest rate cuts materialize in 2026, Singapore's fund management sector could see a rebound. Conversely, persistent volatility and regulatory tightening may keep the industry in its current subdued posture.

MAS continues to position Singapore as a leading fund domiciliation hub via the VCC framework. The question for 2026 is whether the combination of tougher rules on substance, enhanced retail access, and the global rate cycle will reignite growth—or further test the resilience of the city-state's fund managers.