Singapore’s equity market has faced years of declining listings, subdued investor interest, and limited liquidity beyond the index heavyweights. The market is also among the most concentrated in Asia, as proxied by the Morningstar Singapore Index (Exhibit 1). Against this backdrop, policymakers are rolling out an unprecedented wave of policy initiatives.
Exhibit 1: Concentration Across Morningstar Indexes in Asia
The Monetary Authority of Singapore established the Equities Market Review Group in August 2024 to design a reform agenda that strengthens and revitalizes the equity landscape. The package’s centerpiece is the Equity Market Development Programme, which channels seed capital to select asset managers running Singapore-focused equity strategies with an emphasis on small- and mid-cap stocks. The program is already driving change, including a proliferation of fund launches, changes in portfolio positioning of existing offerings, and growth in fund assets.
Competition is driving increased portfolio risk-taking
With a growing field of Singapore equity-focused funds, Singapore equity managers face rising competitive pressure. Along with the MAS’ push to improve price discovery in this historically underinvested SMID-cap segment, managers have been increasingly looking beyond the index heavyweights to identify opportunities in the broader market. The average active Singapore equity fund’s SMID-cap exposure increased to 29% from 12% in 2025, and the average portfolio active share jumped to 36% from 25% (Exhibit 10). Investing in this market cap segment may offer greater return potential through exploitable market inefficiencies and mispricings.
Exhibit 2: Active Singapore Equity Funds' Average Market Cap and Active Share
Capacity and liquidity pressures are rising
However, as funds grow in assets while increasingly targeting less liquid SMID-caps, heightened capacity and liquidity discipline is required to avoid undermining investment execution. Investing in illiquid stocks can result in higher transaction costs via wider bid-ask spreads and entails higher price volatility risk. Exhibit 3 shows the six-month average daily traded volume of some of the most commonly held SMID-cap stocks among the 10 active Singapore equity portfolios as of the end of 2025, which compares with an average of SGD 97 million across the five most held large-cap stocks over the same period.
Exhibit 3: Most Held SMID Cap Stocks by Active Singapore Equity Funds
As the roster of EQDP funds continues to expand, Singapore investors are faced with a practical decision of whether to allocate to a newly incepted strategy or an established one. Morningstar research and academic studies have repeatedly demonstrated that fees are a reliable predictor of the future success of a fund. However, most EQDP funds have yet to publish a total cost measure, making it difficult to assess the true cost of investing in these strategies. Given that EQDP funds are encouraged to sport a SMID-cap tilt, they will require a team with a demonstrable edge and/or track record in SMID-cap investing and capacity management. Managers with existing capabilities and proven track records generally offer a more reliable foundation.
To read more about the implications of these reforms and how to determine whether EQDP-backed funds merit an allocation in your portfolio, please visit Singapore’s Equity Market Recharged for the full report.
