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  • Writer's pictureSOH OOI KEAN JIN

What are the differences between a fund manager and a boutique fund manager under Malaysian regulations / relevant laws?



As a brief introduction, a fund manager is a professional who is a financial expert in managing funds through a portfolio of, amongst others, equities, bonds and collective investment schemes on behalf of a client. 

 

The regulated activity of fund management is defined in the Capital Markets and Services Act 2007 (“CMSA”) as,

 

“Fund management means undertaking on behalf of any other person, the management: 

 

  1. portfolio of securities or derivaties or a combination of both, by a portfolio fund manager, whether on a discretionary authority or otherwise; or

  2. an asset or a class of asset in a unit trust scheme by an asset fund manager.”

 

In order to conduct a fund management business in Malaysia, one is required to hold a Capital Markets Services License (“CMSL”) pursuant to Section 58 (1) of the CMSA.  The said license is issued by the Securities Commission Malaysia (“SC”).

 

Under the Malaysian regulatory regime, there is more than one category of fund managers.  This brief article is intended to explain the difference between a fund manager (in relation to portfolio management) and a boutique fund manager (in relation to portfolio management).  For the avoidance of doubt, both these categories of fund managers are required to hold a CMSL for the regulated activity of fund management. 



A.         Licensing Requirements*

Fund Manager

Boutique Fund Manager

Full-fledged fund managers are subject to more stringent licensing requirements such as:

Boutique fund managers are provided with more facilitative licensing requirement:

Capital Requirements:

 

  • minimum paid-up capital of RM2,000,000 and shareholders’ funds of RM2,000,000 to be maintained at all times.

Capital Requirements:

 

  • minimum paid-up capital of RM500,000 and shareholders’ funds of RM500,000 to be maintained at all times.

Shareholding Composition:

 

  • If a fund management company is owned or controlled by a company, the fund management company must be a “related corporation” of an entity regulated by the SC or the Central Bank of Malaysia or such other entities as may be approved by the SC.

 

  • If a fund management company is owned by individuals, two (2) of the shareholders whose total shareholding forms at least fifty one percent (51%) must respectively have the following requisite track record:

a) Ten (10) years of relevant experience in the capital market; and

b) At least one (1) of the two (2) shareholders must have five (5) years of direct experience in fund management in relation to portfolio management activities.

 

Shareholding Composition:

 

  • The boutique fund management company must have a substantial shareholder (As described in Section 136 of the Companies Act 2006 as a person having an interest in not less than five percent (5%) of the nominal amount of the voting shares in a company) and/or director who is a Capital Market Services Representative License Holder for the regulated activity of fund management.

Human Resource Requirements:

 

  • At least two (2) Capital Markets and Services Representative License Holders.

 

  • At least one (1) Bumiputera director on the Board.

 

  • Maintain at all times a thirty percent (30%) Bumiputera composition for representatives conducting licensed activities. As an example, if the fund management company appoints 6 persons who qualifies as a Capital Markets and Services Representative to conduct portfolio management, out of the six (6), two (2) of the said representatives must be a Bumiputera.

 

  • Maintain at all times a Bumiputera composition of at least thirty percent (30%) in respect of the employees.

 

Person in Charge of Regulatory Compliance

 

  • Must appoint a compliance officer with the specified qualifications to be approved by and registered with the SC.

Human Resource Requirements:

 

  • At least one (1) Capital Markets and Services Representative License Holder has to be a director.

 

Person in Charge of Regulatory Compliance

 

  • Have a responsible person for compliance instead of a dedicated compliance officer.  Such person can carry out dual roles ensure that there is no conflict of interest arising from the functions undertaken by the responsible person.

Restriction on Amount of Assets under Management

 

No restrictions.

Restriction on Amount of Assets under Management

 

Not more than Ringgit Malaysia Seven Hundred and Fifty Million (RM750,000,000).

Client Base

 

  • No restrictions. 

  • They are able to provide services to retail and also institutional investors.

Client Base

 

  • Restricted to only “sophisticated investors” (means any person who is determined by the Commission in any guidelines issued under Section 377 of the CMSA).

 

  • Total number of clients does not exceed fifty (50) of which not more than fifteen (15) may be funds or collective investment schemes.

In summary, a boutique fund manager tends to offer more specialized investment services with a more flexible licensing structure, catering to only a select group of investors, whereas traditional fund managers are able to operate on a larger scale and serve a broader client base.


If you wish to have a more in-depth discussion on the above, please contact our firm.



*Source:

The information contained in this infographic is based on the relevant regulations, guidelines and handbooks issued by the Securities Commission Malaysia as at 8 April 2024.

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