The Monetary Authority of Singapore is implementing changes to its hedge fund industry, with particular focus on capital requirements and regulatory rules.

Singapore hedge fund firms managing over S$250 million ($183 million), for instance, will soon need to file for a capital markets licence.

According to present laws, managers are exempt from having to apply for a licence provided they managed funds for 30 or fewer qualified investors. The proposed change states that managers who hold less than S$250 million will not need to file although their base capital should be at least S$250,000. These managers will be called notified fund management companies.

Hedge fund managers with over S$250 million, meanwhile, can apply for a licence that will classify them as accredited and institutional investors. Besides capital requirements, all fund managers will also need to comply with prescribed business conduct, which includes maintaining clients' assets with independent custodians and segregating duties between fund management and administration.

The increasing scrutiny over the activities of hedge funds and private equity firms worldwide, especially in the wake of the financial crisis, called for the proposed changes, the MAS said in a statement.

Singapore, which oversees at least $34.9 billion, has the second largest hedge fund sector in Asia, next to Hong Kong, and has 138 single-strategy hedge fund managers with over 800 professionals.

"As fund management firms expand their businesses and their assets under management grow they will require closer supervision in view of their greater market impact," said the MAS.

"We remain committed to building Singapore as a fund management and alternative investment hub."

The MAS is welcoming comments on the proposals until 31 May.