For most of the past decade, Singapore's pitch to fund managers has centred on the fund itself: tax exemption schemes for qualifying funds, and the variable capital company (VCC) as a flexible home for them. The measures MAS announced on 19 August 2026 shift the focus to the people who manage the money and how they are rewarded. We think that is the right place to push next, and one of the three measures stands well above the others.
The three measures in brief
- A tax exemption on profit-related returns. From Year of Assessment 2027, profit-related returns that fund managers earn from managing qualifying funds, such as carried interest and similar profit shares paid under commercial fund arrangements, will be exempt from tax. It covers companies, partnerships and individuals. Salaries, bonuses and other employee pay are not included. Managers will need to meet substance conditions, including a minimum number of investment professionals in Singapore, and the full conditions will be set out in Budget 2027.
- The MAS Hedge Fund Investment Programme. MAS will invest with hedge fund managers that set up or expand their teams in Singapore. Details are still to come.
- An Investment Management Track under the ONE Pass. Developed with the Ministry of Manpower, this route is aimed at senior investment professionals, and it is expected to give weight to pay linked to investment performance, not just fixed monthly salary.
Why the carried interest exemption matters most
For many fund managers, carried interest is the main economic reward. A team may spend ten years building a portfolio for a share of the profits that arrives only at the end. Singapore does not tax capital gains, but whether a particular carry arrangement produces a capital gain or taxable income has depended on its facts, and managers have had to structure and document carefully to stay on the right side of that line.
An explicit exemption removes a question that previously had to be answered fund by fund. It also gives Singapore a clear answer to Hong Kong, which has offered a concession for carried interest since 2021. For a manager deciding where to base an investment team, certainty about how the team's main reward will be taxed carries real weight.
What we will be looking for in Budget 2027
The announcement sets the direction; Budget 2027 will set the terms. These are the questions we will be reading for:
- Which funds qualify. Whether a fund must hold an award under one of the fund tax incentive schemes, and whether funds that lose their status part-way through their life are affected.
- The substance test. How many investment professionals a manager needs in Singapore, and whether there is a spending requirement as well.
- What counts as a commercial arrangement. Carry paid to a general partner, to a separate carry vehicle or directly to individuals may be treated differently.
- The evidence required. What a manager will need to show to claim the exemption, and for how long it must be kept.
What it means for how funds are administered
Whatever the final conditions, we expect the exemption to reward managers whose carry can be traced, period by period, back to the fund documents. In practice that means:
- Running the waterfall every period, not only at exit. Accrued carry, calculated on each NAV and reconciled to the fund documents, creates a record of how the final carry was earned.
- Keeping carry and pay clearly apart. Because salaries and bonuses fall outside the exemption, payments to carry vehicles and payroll should never be blurred.
- Protecting the fund's own incentive status. If the exemption is tied to qualifying funds, the fund's annual conditions, such as its minimum assets and local spending, matter to the manager as well as to investors.
The ONE Pass track points the same way. If performance-linked pay is to count towards a work pass, records of capital accounts and carry prepared independently of the manager are likely to be useful evidence.
A note on the hedge fund programme
More managers on the ground means more prime brokers, service providers and experienced people in Singapore, and a deeper pool benefits every part of the industry.
Our view
Taken together, these measures are a confident step. They recognise that fund managers choose a base for their teams as much as for their funds, and they address the part of a manager's reward that has carried the most uncertainty.
For managers launching funds in 2026 and 2027, three things are worth doing now: set up the carry structure and waterfall with the exemption in mind, keep the fund's incentive conditions in good order from the first close, and plan to revisit both with your tax adviser once Budget 2027 is published. We will update this piece when the details arrive.