Singapore built its post-Covid reputation as Asia's hedge fund capital on one pitch: come here, pay less. Hong Kong is now testing that pitch with a zero-tax offer on carried interest and performance fees. That is real pressure.
The Monetary Authority of Singapore has been talking with investment firms about ways to keep the city-state competitive, according to the Financial Times, including possible changes to its existing 10% fund-manager tax concession and broader reductions in operating costs for funds based there. Hong Kong forced the issue first. On June 12, its government gazetted the Inland Revenue (Amendment) (Preferential Tax Regimes for Funds, Family-owned Investment Holding Vehicles and Carried Interest) Bill 2026, which would expand tax concessions for funds, family offices and carried interest.
This is not a gesture. It's a price cut. Hong Kong currently taxes salaries at up to 17%, and the proposed carried-interest changes would make the eligible performance-fee slice tax-free for managers who qualify. KPMG said the bill is proposed to apply retroactively from the 2025-26 year of assessment, which began on April 1, 2025. A bonus can move. For a hedge fund manager having a good year, the performance-fee line is often where the real money sits.
The mechanics matter more than the slogan. Under Hong Kong's proposed Schedule 16D changes, the bill would widen the carried-interest regime beyond the old private-equity focus and include performance fees tied to a wider range of fund profits. Law firm Deacons has also noted that the proposal removes the hurdle-rate requirement in carried interest arrangements, which makes the concession easier to use rather than merely easier to advertise.
Singapore has no matching zero-rate concession. Under the Financial Sector Incentive scheme for fund managers, qualifying fund-management income can be taxed at 10% instead of Singapore's standard 17% corporate rate. Singapore has also extended the 13O and 13U fund tax exemption schemes through 2029. But carried interest paid to an individual manager can still be taxed as employment income, and IRAS lists the top resident personal income tax rate at 24% from year of assessment 2024 onward. Zero against 24% is not a subtle comparison. You can see why MAS is listening.
Singapore Won This Business For A Reason
Singapore didn't become the default hedge fund shelter by accident. After Hong Kong's political upheaval and pandemic restrictions, funds, family offices and senior finance staff moved south because Singapore looked predictable. The Financial Times reported that Citadel told some Hong Kong-based members of its global quantitative strategies team in recent years that they would need to relocate or leave, and some of those researchers moved to Singapore. That kind of move changes a market more than a slogan ever could.
Family offices followed the same broad route. Singapore's Variable Capital Company structure gave managers a cleaner way to launch funds locally, while the 13O and 13U exemptions gave wealthy families a tax framework they could understand. You don't need to romanticise that. The pitch was practical: bring the capital, bring the staff, and the rules will be steady.
Hong Kong wants that flow reversed. The South China Morning Post has described the bonus tax break as a measure aimed at sharpening Hong Kong's edge over Singapore, and the government's own June 12 statement said the bill is meant to attract more funds and family offices to establish a presence in the city. Hong Kong also has one card Singapore can't copy: direct access to mainland China capital markets. When markets are open and money is moving, that card matters.
The First Moves Are Already Visible
The traffic isn't entirely one way anymore. FengHe Fund Management, a Singapore-based hedge fund with about $9 billion under management, plans to open a Hong Kong office in the second half of 2026, Reuters reported in March. The firm has leased space at Two International Finance Centre in Central and is applying for an asset management licence, according to Reuters, which also cited CEO Kwek Hyen Yong.
One office does not undo a decade of movement into Singapore. It does show you where the argument is heading. Funds do not choose a city only by reading a tax table. They weigh licences, lease costs, staff, travel, client access and whether the next market opportunity is easier to reach from Raffles Place or Central. Frankly, any article that treats this as a clean tax-rate contest is missing how funds actually behave.
Singapore also has a political problem if it cuts too visibly. The FT noted that any tax reduction for wealthy fund managers would be sensitive when ordinary residents are still dealing with higher living costs. That is why MAS may lean toward lower operating costs and adjustments to the existing 10% incentive rather than a loud zero-rate answer. Quiet relief is easier to sell than a tax break with a billionaire's name attached to it.
Nothing has moved yet in law. Hong Kong's bill still has to clear the Legislative Council, even though it has already gone through the gazette process and entered the legislative track. MAS has confirmed no final package. What exists today is the number that fund managers will remember: Hong Kong is trying to make eligible carry and performance fees tax-free, while Singapore is deciding whether defending its lead is worth the political cost.
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