Singaporean regulator the Monetary Authority of Singapore is allowing Singapore-based mutual funds to start using derivatives. Local investors had previously been able to access derivative-investing mutual funds sold from Europe under the UCITS III directive.
C.J. Donley, managing director of equity derivative sales at Deutsche Bank in Hong Kong, said, "[The change is] one way that the playing field gets leveled between the various different fund types," such as mutual funds, portfolio managers, collective investment schemes, traditional asset managers and hedge funds. He thinks mutual funds will use derivatives for hedging and monetizing, and they'll stick to simple products. A large part of the interest will be in stock-replacement strategies, where a long stock is replaced by a call option.
Donley added that it would probably take between 18 months and two years before the funds have fully converted to derivatives.