How to start a hedge fund in malaysia? | Forex Factory

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How to start a hedge fund in malaysia?

  • #1
  • First Post: Edited Sep 13, 2011 2:15am Sep 6, 2011 2:14am | Edited Sep 13, 2011 2:15am
Hi to all, I am just curious. What must a Malaysian Citizen do in malaysia to be able to legally open a hedge fund in Malaysia and trade the forex among other things?

PS: I did not imply I want to start one there.
Riding the order flow
  • #2
  • Sep 8, 2011 12:25am Sep 8, 2011 12:25am
130 views but no answer. I called up quite a few govt. department including the central bank in Malaysia and none of them know.... Hedge funds are some of the most profitable organizations, I will be surprise if the Malaysian govt. don't have any policy/regulation regarding it. I am now getting nervous about it. Maybe all the successful traders in Malaysia are setting up their funds across the ditch in Singapore hence more brain drain.
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  • #3
  • Sep 12, 2011 12:21am Sep 12, 2011 12:21am
Hi.

1. I'm all in favor of creating an FX-based hedge fund (run by accredited fund managers) in the Malaysian financial markets universe, for purely selfish reasons, which are my own.

Some academic questions:

2. Where is the need for such a hedge fund within a Malaysian context? Whose needs will actually be served by such a fund? I'd very much like to know your thoughts on this.

3. No one country has rules or laws which adequately cover all conceivable asset classes. Not even the US, given how they bollocks-ed up the sub-prime issue.

4. So I don't think it's fair to demand the same from Malaysia, as financial markets evolve every season. This is evidenced by the number of new structured products introduced every year by unscrupulous structured product manufacturers (like myself).

5. As in the case of any time when a new product or business model is introduced within any one country's financial markets universe, the only way to know if such a hedge fund (as you described) will be allowed to open, is to try to apply for a license and see what happens.

6. There is no established text book on how to open hedge fund in one country, AFAIK. Is there one in Australia where you are? Maybe you can tell us how it's done in Australia?
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #4
  • Sep 12, 2011 1:26am Sep 12, 2011 1:26am
It won't happen for now.
  • #5
  • Sep 12, 2011 1:32am Sep 12, 2011 1:32am
Quoting 168ipoh
It won't happen for now.
What won't happen now? And why, please?
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #6
  • Sep 13, 2011 1:31am Sep 13, 2011 1:31am
Hi.

1. I'm not entirely sure what it is you're trying to say in reply to the first para in my last post. But I'll try my best to reply to the rest.

2. You state that there is some kind of tax advantage to set a hedge fund in Malaysia instead of say in Australia. By this do you mean, the funds are domiciled in Malaysia? And would you be able to articulate what that advantage is?

3. I apologize if my last couple of questions are Basic Investor 101 type questions. In my circumstance, my tax profile is pretty simple.

4. I also get the impression that you seem to think domiciling the hedge funds' funds in havens like the Caymans is not such a good thing. Am I mistaken in my impression?

5. If I were a Malaysian having lived abroad and intending to come back to Malaysia, I would not think investing in a hedge fund domiciled in Malaysia would be such a "nice option".

6. In these days of uncertainty, it would be better to "internationalize" my assets as widely as economically appropriate so as not to expose any significant proportion of my assets to country risk.

7. I would recommend against registering any hedge fund in Malaysia. You haven't actually answered my 2nd para in my last post: "Where is the need for such a hedge fund within a Malaysian context? WHOSE needs will actually be served by such a fund?"

8. You'll have to excuse me if I do not respond to any of your more political toned statements. I'm apolitical and prefer to concentrate on making money while adapting to whatever legal context I find myself in.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #7
  • Edited 3:03am Sep 13, 2011 2:00am | Edited 3:03am
The main goal is not to make as much money as possible, it is to come back to Malaysia and live for personal reasons(being a good and faithful Malaysian), plain and simple. Being in Malaysia doesn't require me to have my assets in Malaysia. I don't have the ambition to run my own hedge fund, just asking only. There is no need to have a fund in Malaysia to have any advantage than having a fund somewhere else. I can't run a hedge in Aus when I live in Malaysia, not sure of any advantage doing that, personal preference not to only. I care not if I am allowed to have a hedge in Malaysia, if I can, good, if not then not. If it is illegal I have no intention to start one at all. This is my officially declaration that I have no intentions of doing anything illegal in or outside Malaysia. Buisness tax in Aus is higher than Malaysia's, it is a fact, nothing more sophisticated than that in mind. No, it is good to have a fund or money making company in a tax haven like Cayman if it is legal in your country where you have your citizenship or PR. I mean nothing in my first paragraph, just a mental glitch of mine, a writing mistake.

EDIT: I was wrong to say there is any flaws in with the rules or policy or anyone of Malaysia. It is there to protect our well being. It has for the most part been successful, nothing is perfect.
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  • #8
  • Sep 13, 2011 4:01am Sep 13, 2011 4:01am
1. Noted sir.

2. However, my opinion: even if you're allowed to domicile a hedge fund in Malaysia (as opposed to having an operations office in Malaysia and domiciling in, say, the BVI), I would recommend against it.

3. Malaysia's "country risk" is relatively high in my mind.

4. To anyone who have such ambitions, I wish them well. But I hope they're not wanting to run a hedge fund in Malaysia out of some misguided sense of patriotism or "personal reasons".

5. Patriotism is last century's story. It doesn't put food on the table. If the legal climate in wherever my tax domicile is inhibits my ability to make money for my family, I would not hesitate to migrate elsewhere.

6. To you, I wish you all the best in whatever it is you want to do if or when you go back to Malaysia.

Regards,
Imran
Quoting Binyamin
The main goal is not to make as much money as possible, it is to come back to Malaysia and live for personal reasons, plain and simple. Being in Malaysia doesn't require me to have my assets in Malaysia. There is no need to have a fund in Malaysia to have any advantage than having a fund somewhere else. I can't run a hedge in Aus when I live in Malaysia, not sure of any advantage doing that, personal preference not to only. I care not if I am allowed to have a hedge in Malaysia, if I can, good, if not then not. This is my officially declaration...
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #9
  • Sep 13, 2011 8:20pm Sep 13, 2011 8:20pm
Currently (in Malaysia) there should be quite a number of Money Manager (MM) or Asset Manager (AM) trading in the retail spot forex market for private clients. Those clients should have signed agreements with brokers in foreign countries, giving MM or AM limited power of attorney and agreement on paying performance fees. Can the M'sian authorities go after MM or AM by saying they do not have licence for doing so? I mean do those MM or AM need to be registered with whatever relevant local authorities, even though agreements signed are not locally binding?
福 子 Victor V
  • #10
  • Edited 9:51pm Sep 13, 2011 9:40pm | Edited 9:51pm
1. I've only just recently come across such a notion. I never knew such business arrangements existed before in Malaysia.

2. I suppose if the Manager incorporated ALL his business offshore (e.g. in the Seychelles, for instance) so that all his profits or fees is paid to his offshore accounts and NEVER repatriated to ringgit accounts onshore, then the "authorities" MIGHT not have jurisdiction as the income is foreign-derived (as far as Inland Revenue Board is concerned). But I'm not a lawyer or a tax expert, so I'm just guessing.

3. Whether or not such Managers should be "registered" with LOCAL authorities, is debatable.

4. Speaking for myself, the above should not even be the issue.

5. The Managers SHOULD be "qualified" to trade for other people and are not some fly-by-night wannabe hedge fund pseudo hotshots.

6. And that qualification can only come from exam-based certification leading to "registration" with whatever financial markets authority.

7. Sorry, but if one is too lazy to study for certification, then it's likely one will be sloppy in managing Other People's Money.

My two cents.


EDIT: I'm not saying certification IMPLIES trustworthiness or anything like that. At the end of the day, independently-verified track records is important.

Quoting camvcvoo
Currently (in Malaysia) there should be quite a number of Money Manager (MM) or Asset Manager (AM) trading in the retail spot forex market for private clients. Those clients should have signed agreements with brokers in foreign countries, giving MM or AM limited power of attorney and agreement on paying performance fees. Can the M'sian authorities go after MM or AM by saying they do not have licence for doing so? I mean do those MM or AM need to be registered with whatever relevant local authorities, even though agreements signed are not locally...
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #11
  • Sep 13, 2011 9:55pm Sep 13, 2011 9:55pm
Imran,

I would like to explore more on this issue with you privately.

Do you think you can PM me?

Many thanks.

Victor
福 子 Victor V
  • #12
  • Sep 13, 2011 10:10pm Sep 13, 2011 10:10pm
Well, I haven't disabled PM, AFAIK.

You can PM me yourself if you wanna ask me anything.

Quoting camvcvoo
Imran,

I would like to explore more on this issue with you privately.

Do you think you can PM me?

Many thanks.

Victor
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #13
  • Sep 18, 2011 4:25am Sep 18, 2011 4:25am
So the setup can actually be really easy.

you setup the fund in Australia, and get it licenced -its easier than you think. PM me for details - no time wasters. This as credibility and security to your fund to help with investors etc.

As you have said, Australia has a higher tax rate than Malaysia, so setup a company in Malaysia. The company in Malaysia performs a service for the company in Australia, so the company in Australia pays the Malaysia company and therefore makes 0 profit and pays no tax, but the company in Malaysia makes the profit. I dont know what the tax rate is in Malaysia but I know Hong Kong is 0 - so perhaps its better to setup a HK company.
  • #14
  • Sep 20, 2011 11:23pm Sep 20, 2011 11:23pm
Hi I have heard all your opinions. Thanks. I just graduated a few years ago in math and engineering and still young with a day job. I know one person that is managing banks and insurance money by showing 5 years of good trading record in Australia. Therefore if that applies to me, I have 2.5 more years of sound trading records to have and if I wait until my 30s it will make consideration by institution easier I think. Right now as I trade I will learn what it takes to manage professionally vs trading for yourself. I may or may not end up an institutional fund manager and I don't care either, all I know is I want to trade for life period. Yeah you are right I don't have to be in Malaysia, unless it is my choice. However I do desire to be back. I will be open when the time comes.
Riding the order flow
  • #15
  • Mar 25, 2012 9:37pm Mar 25, 2012 9:37pm
Sorry if this is a belated reply but I was searching about Malaysia HF and came across this.

You cannot set up a Malaysia hedge fund. You might think you can domicile the fund abroad but if your aim is to take Malaysian clients money, be it retail or wholesale, then your fund has to be in Malaysia or setup a feeder into your foreign domiciled fund.
There are very specific rules with funds in Malaysia and the SC will not approve a feeder into a HF unless you it is structured specifically such that it's not really a HF anymore.
If you aim to take money NOT from Malaysian clients, then it's a different matter. But even then, there are specific rules in other jurisdiction too about marketing a foreign fund. It is a lot easier if you are targeting only institutional clients like insurance companies because then in Singapore and Australia for example, you can market a foreign fund.
  • #16
  • Mar 25, 2012 10:22pm Mar 25, 2012 10:22pm
So if you're marketing your prospectus to Malaysians, I guess it has to be "registered" onshore?

(I think I already know the answer. Just want to see you confirm it, or not.)

Quoting notaguru
Sorry if this is a belated reply but I was searching about Malaysia HF and came across this.

You cannot set up a Malaysia hedge fund. You might think you can domicile the fund abroad but if your aim is to take Malaysian clients money, be it retail or wholesale, then your fund has to be in Malaysia or setup a feeder into your foreign domiciled fund.
There are very specific rules with funds in Malaysia and the SC will not approve a feeder into a HF unless you it is structured specifically such that it's not really a HF anymore.
If you aim to take...
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #17
  • Mar 25, 2012 10:47pm Mar 25, 2012 10:47pm
Quoting skenobi
So if you're marketing your prospectus to Malaysians, I guess it has to be "registered" onshore?

(I think I already know the answer. Just want to see you confirm it, or not.)
Correct. http://www.sc.com.my/eng/html/resour...Guidelines.pdf
It is very onerous - in fact, you will need to go via a local distributor who must get permission from the SC and if the SC knows it's a 'hedge fund' then they usually won't approve it.

At the end of the day, you must ask yourself what it is you want to do - if you want to attract institutional money with a HF, it is near impossible in Malaysia anyway. For insurance companies for example, their investments into a foreign ccy denominated hegde fund would be so expensive on their RBC that its' prohibitive for them. Other institutions are even harder unless you know someone somewhere very well.
That leaves you with the HNWI and that, I believe is your best bet.
  • #18
  • Mar 25, 2012 11:09pm Mar 25, 2012 11:09pm
Thanks for the clarification.

I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #19
  • Apr 2, 2015 3:33am Apr 2, 2015 3:33am
Hello,

I am reviving an old thread, I hope it is okay. I do not wish to create a new thread.

Regarding hedge funds in Malaysia, I am actually interested in setting up a small fund managing a small number of investors money. However, looking at the current policies/laws/restrictions by our Security Commission (SC), it is quite difficult if not impossible to set up a legal hedge fund. However, I have come across a few funds while I was researching about hedge funds in Malaysia.
http://singular.com.my/index.htm
http://www.icapital.my/

As far as I am understood, these two funds are closed-end fund. Anyone knows if these funds (closed-end) funds are easier (or possible) to set up over here?

Thanks.
  • #20
  • Jun 5, 2015 11:10pm Jun 5, 2015 11:10pm
Hey superblack,

Thanks for reviving the thread. Chanced upon this thread when I, like you, was figuring out how to set up a small boutique fund.

I just wanted to compared notes here. I guess the reason why it's near imposible to set up a 'hedge fund' is because obtaining the capital license is difficult. But if I'm understanding the Capital Market Services Act (CMSA) correctly [you can download it at SC's website], under Section 57(2) on page 373, you don't technically need a capital markets license if you're categorized under Schedule 3.

Under Schedule 3, you can manage money without the license as part of a trust or corporation. To do that, you would need to be to adhere to regulations/rules set out by the Trust Act and Companies Act. Reading the Act might be tough - but a quick google on the SSM website gives you a good FAQ sheet on setting up a Trust company. Maybe you might want to talk to SSM instead.

Let me know if this makes sense. And thanks skenobi for all the very good answers. If you (skenobi) don't mind, I would like to send you a PM.
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