Singapore Plans Greenwich-Style Hedge-Fund Area at Nepal Hill

Date: Friday, March 5, 2010
Author: Netty Ismail, Bloomberg

Singapore is planning to create its own hedge-fund capital modeled after Greenwich, Connecticut, in a cluster of ex-British army homes called Nepal Hill, a 15- minute cab-ride from the city-state’s main banking district.

The Monetary Authority of Singapore and JTC Corp. -- the government agency developing and marketing the project in Nepal Hill -- quietly asked hedge fund managers in January to visit the district’s so-called black-and-white bungalows, named for their white-washed walls and dark timber frames, according to a copy of the invitation obtained by Bloomberg News.

Singapore is seeking to attract firms planning to expand in the region as Asia leads the global economic recovery and the U.S. and Europe increase regulation. The proposed cluster follows tax and regulatory incentives that have made it easier for funds to set up shop on the island than in Asian cities such as Hong Kong and Tokyo, helping the industry grow from near zero in 1997 to almost 140 firms today.

Aisling Analytics Pte will “certainly look at it as a potential location” when its lease at Suntec City, next to the central business district, comes up for renewal, said Michael Coleman, the hedge-fund firm’s managing director.

“I’ve visited and think it’s a very interesting development and a great alternative to a traditional office,” he said. “You’re surrounded by greenery, have your own garden to enjoy and the area is rapidly developing.”

Falling Rents

The downside is that it’s “off the beaten track” for investors used to meeting in Singapore’s main office districts, Coleman said. Aisling manages the $1.6 billion Merchant Commodity Fund and the Merchant Equity Fund.

Rents in Singapore, the most expensive in Asia after Tokyo and Hong Kong, fell 46 percent, on average, in the fourth quarter, the steepest decline in the region from a year earlier, according to Boston-based commercial real estate company Colliers International. The average top-grade office monthly rental in Singapore’s central business district fell to an average of S$6.29 ($4.50) per square foot in the last quarter, Colliers said in a report in February.

JTC could lure managers by making rents at Nepal Hill “very attractive, at least at the beginning,” said Stephane Pizzo, who set up his hedge-fund investing firm, Lotus Peak Capital, last year. He said he has yet to view the proposed enclave because the space offered was “too large” for his business. He currently works from a refurbished shophouse in Chinatown where more than half a dozen Italian restaurants are within walking distance of his office.

Incentives

“The hub idea on paper is great, but it needs to be encouraged,” Pizzo said. “The more people and incentives to move there, the better.”

Nepal Hill is part of a development called “one-north,” referring to Singapore’s location one degree north of the equator, that is already home to industry clusters including Singapore’s biomedical research hub, Biopolis. The 180-hectare area will be developed in stages within the next 20 years, JTC said in the invitation to managers.

The bungalows, which formerly housed British army personnel and their families, are remnants of Singapore’s history under British colonial rule. The proposed enclave is across the road from the Rochester Park dining hub, where restaurants such as Min Jiang, which serves Szechuan cuisine, and bars including Da Paolo Bistro Bar are also housed in colonial bungalows.

“Nepal Hill has been chosen for its unique ambience of black and white architectural heritage amid the key research clusters, and these bungalows nestled in lush tropical foliage, will be the ideal setting for offices for the alternative investments,” JTC and the monetary authority said in the e- mailed invitation.

Rapid Growth

Singapore, which has a quarter of the land area of Rhode Island, has no natural resources and is promoting industries such as biotechnology research and wealth management to offset slowing electronics exports.

The island-state’s hedge fund industry has grown to 138 single-strategy hedge-fund managers employing more than 800 professionals from near zero in 1997, according to a survey by the local chapter of the Alternative Investment Management Association. The industry oversees at least $34.9 billion, excluding assets managed by several of the large global firms, it said, making it Asia’s second biggest behind Hong Kong.

Nepal Hill will “need at least one substantial anchor tenant” to draw potential investors in funds to the site, said Peter Douglas, the principal of GFIA, a Singapore-based hedge- fund consultancy firm that also runs a wealth management firm.

“Managers that have tried the out-of-town route so far have found it hard to lure investors with a limited amount of time to ‘do the rounds’ in Singapore,” said Douglas. “It could work, but I think it could take several years to get to the critical mass.”

Alternative for Alternatives

Douglas is one of several alternative investment managers renting space in refurbished pre-war shop-houses in Chinatown, on the fringe of the financial district. His office, with hand- painted wall murals, is round the corner from European and Indochinese restaurants and within walking distance of Singapore’s oldest Hindu temple and other places of worship.

“For now, the equivalent ‘midtown versus Connecticut’ deal in Singapore is ‘Raffles Place versus Chinatown,’” Douglas said, referring to the main banking area. “And that’s working well.”

Greenwich, which lies about 30 miles (48 kilometers) northeast of midtown Manhattan, is home to hedge-fund firms including Paul Tudor Jones’ Tudor Investment Corp. and FrontPoint Partners LLC, a $7 billion hedge fund firm owned by Morgan Stanley.

“The main driver is the quality of life,” Lotus Peak’s Pizzo said.

To contact the reporter on this story: Netty Ismail in Singapore nismail3@bloomberg.net.