lim hng kiang : what ’ s next for hedge funds? keynote address by mr lim hng kiang, minister for trade and industry and deputy chairman of the monetary authority of singapore, at the skybridge alternative ( salt ) conference, marina bay sands, 17 october 2012. * * * mr anthony scaramucci, managing partner, skybridge capital distinguished guests, ladies and gentlemen. a very good morning to all of you. i am very pleased to join you at the inaugural asian leg of the salt conference. global outlook as we move into the last quarter of 2012, the world economic outlook remains uncertain. advanced economies continue to encounter headwinds as deleveraging, fiscal consolidation and a still - weak financial system act as a drag on growth. with us and europe facing economic difficulties, asia will not be immune to a global slowdown given its heavy reliance on trade. this can be seen by asia ’ s slowing growth in the last two quarters as weak demand in the g3, especially the eurozone, exerted a sharp drag on exports from the region. 1 the imf has recently revised its growth estimates downwards. global growth is now expected to be 3. 3 % in 2012 and 3. 6 % in 2013. 2 however, this is dependent on the assumption that there will be sufficient policy action to ease financial conditions globally and that recent policy easing moves in emerging market economies will gain traction. overall, global growth is expected to remain muted for an extended period. impact of macro conditions on the global hedge fund industry the macro economic environment has left global institutions, including hedge funds, grappling with historically low interest rates, volatile financial markets, and an environment that has grown averse to risk taking. as hedge funds cope with a more demanding operating and economic environment, the industry will have to deal with two key challenges. firstly, soft returns amidst the volatile environment. the average hedge fund returns across strategies was negative 4. 6 % in 2011, with most of the losses occurring in 3q 2011 when global equities declined by around 17 %. 3 whilst hedge fund performance this year - to - date as at end - august 2012 was up 3. 8 % 3, the outlook remains uncertain and i think hedge funds may struggle to provide consistent returns over time. secondly, a more challenging fund - raising environment. business and compliance costs have increased due to more stringent manager selection criteria by investors and enhanced global regulatory standards. as a result, funding gestation periods

six years, a historically unprecedented occurrence in the united states. moreover, assuming that the fomc follows the plans that we outlined in june 2011 for winding down the federal reserve ’ s balance sheet, any initial bis central bankers ’ speeches sales of our securities holdings presumably would not begin until 2015, sometime after the first increase in the target federal funds rate. the effects of monetary policy on savers this extended period of depressed levels of economic activity and low interest rates will continue to have important implications for household income flows. in particular, critics of the federal reserve ’ s accommodative monetary policy are correct that the low level of interest rates represents a strain on households who rely on income from interest - bearing assets ; indeed, the flow of interest income that households earn on their savings has declined about one - fourth since the recession began. however, i would also emphasize that many households are benefiting from the low level of interest rates, and some critics of the federal reserve ’ s accommodative monetary policy seem to minimize this point. purchases of motor vehicles and other household durables can be financed more cheaply, and in many cases, households have been able to refinance their mortgages into lower - rate loans, freeing up income for other uses. in addition, interest - bearing assets represent only a modest portion of overall household assets. according to the federal reserve ’ s survey of consumer finances, less than 7 percent of total household assets are directly held in transaction accounts, certificates of deposit, savings bonds, and bonds. 1 instead, the bulk of household wealth is held in stocks, retirement accounts, business equity, and real estate. for these other types of assets, rates of return depend primarily on the strength of the economy and how fast the economy is growing. thus, these returns should be supported, over time, by the accommodative monetary policy that we have in place. moreover, the federal reserve aims to keep inflation low and stable over time, which limits the risk to investors that high inflation will undermine the value of their savings. i also want to specifically address the argument raised by critics that an extended period of low interest rates will discourage households from saving and, as a result, diminish the longer - run economic growth prospects of the u. s. economy. currently, households have a number of reasons to save in addition to their desire to earn interest. for instance, they need to be prepared for unexpected expenses and to rebuild the retirement nest