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Singapore. Along a sun-splashed cobblestone street in central Singapore, coatless bankers with loosened ties quaff imported beers in a neighborhood of gaily painted shophouses called Duxton Hill.

The scene is almost European. And for long-time residents of this Southeast Asian city-state at the crossroads of some of the world’s busiest shipping lanes, a bit bemusing.

Just a couple of years ago, late-night revelers used to tumble out of ill-lit pubs and grimy, illicit brothels on Duxton Hill.

The transformation is a microcosm of the reinventions Singapore has undergone to keep an island with almost no resources and roughly the size of New York City competitive in a neighborhood that has some of the fast-growing emerging markets.

Singapore has attracted hundreds of boutique funds, advisory firms and brokerages in the past decade, lured by its light-touch registration requirements and relatively benign regulatory climate, even as Switzerland, the world’s leading wealth manager, gets tougher on bank secrecy.

“Our vision of this place is the Singapore version of London’s West End,” said Ed Peter, 47, a Swiss-born fund manager who has been buying up shophouses in Duxton Hill.

Peter, Deutsche Bank’s head of asset management for the Asia Pacific, Middle East and Africa before setting up his own firm in Singapore, manages about $650 million in funds.

The squeaky clean city of 5.1 million, nicknamed the “nanny state” for its propensity for micromanagement, is fast emerging as one of the world’s hottest destinations for wealth — and the wealthy, who now have casinos and theme parks for play, and seaside mansions and penthouses to stay.

The Monetary Authority of Singapore, its central bank, estimated overall assets under management in the city totaled a record 1.2 trillion Singapore dollars ($910 billion) at end-2009 — the most in Asia and up about 40 percent from a year ago.

The Boston Consulting Group estimates that private banks alone in Singapore manage about $500 billion in assets.

The numbers are dwarfed by the estimated $2 trillion in private wealth managed in Switzerland, but the growth in Singapore is startling, wealth managers say.

“In the last 10 to 12 years, I’ve seen Singapore really take a leadership role in changing the landscape of the wealth management industry,” says Deepak Sharma, chairman of Citi Private Bank.

“The regulatory environment in Singapore is one of the finest. It has one of the best standards in the world, but at the same time, it is consultative. It engages the industry.”

The big players, including Swiss giants UBS AG and Credit Suisse, who have a global stranglehold on private wealth management, are among those looking East.

UBS, usually chary about its plans, says it will hire 400 new staffers in the Asia-Pacific region in the next few years.

Credit Suisse said net new assets from clients in Asia climbed to 11.5 billion Swiss francs ($11.78 billion) in 2009 from 8.4 billion Swiss francs in 2008. In the first six months of this year, net new assets came in at 7.1 billion Swiss francs.

Morgan Stanley plans to double its Asia headcount in wealth management over the next three years, largely focusing on the top end of the market.

JPMorgan Chase plans to triple its private banking assets in Asia over the next five years and increase its headcount in the region by 40 percent over the current 400, a company spokesman in New York said this week.

“I believe Singapore will be the true private banking hub,” said Massimo Hilber, managing partner at private Swiss bank Marcuard who, like Peter, has an office on Duxton Hill.

“All the big players are here, and the smaller players like us. You have to be here.”

Why Singapore? First, assets held by the Asia Pacific’s high net-worth individuals — people owning more than $1 million excluding home, collectibles and durables — surged 31 percent in 2009 to $9.7 trillion, overtaking Europe, according to CapGemini/Merrill Lynch.

Second, high net-worth individuals seeking high-return investments are turning to emerging markets.

Accordingly, portfolios of such individuals included 22 percent in Asia-Pacific investments in 2009, up from 19 percent in 2008, and would soon overtake Europe, the CapGemini study said.

Many of these changes are focused on Singapore, which is at the crossroads of new wealth being created in China, India and Indonesia, which are among some of the fastest growing economies in the world.

Singapore, which has the world’s highest concentration of millionaires, is poised to grow its own economy by up to 15 percent this year, possibly the fastest rate in the world.

Asia’s other big financial center, Hong Kong, tends to be more focused on investment banking and deal-making in China rather than in the management of private wealth.

“Hong Kong probably makes great business sense from an investment banker perspective, but I don’t think it has invested as much in itself in creating a place for families to live,” says Nick Pollard, Asia chief executive of private banker RBS Coutts.

But having a super-rich pool of foreigners in the city poses the risk of accentuating social tensions.

Singapore households earn an average income of 7,440 Singapore dollars a month, according to government statistics, but the bottom 20 percent earn only 1,274 Singapore dollars.

Already, housing prices are rising faster than in the rest of the region.

The number of overseas workers — mostly for menial and blue- collar jobs — has also risen rapidly to around 1.8 million, a figure that also includes foreigners who have become permanent residents.

That means one in three people in Singapore is a foreigner, one of the highest such proportions in the world outside the Middle East.

One way to ensure some trickle-down effect from Singapore’s rapid growth is on public spending.

The government plans to spend $44 billion alone in the next decade on extending the commuter rail network to cope with a population projected to grow another 25 percent in the next few years following a 25 percent increase in the past decade.

On Singapore’s social tensions, Peter, the fund manager, is somewhat reflective.

“It’s a new risk that’s worth watching. Is it a big risk? No,” he says. “This place has the potential to be Monaco and Luxembourg, and Geneva or even London.”

 
Reuters