What a gross return becomes after the terms and the tax
Hedge funds and private credit, from the figure a fund is marketed on to what the investor keeps: management and performance fees, credit losses and leverage, and the tax that applies to you.
By Eldar Edmond Grady, CEO, PPLI.com. Research checked 27 September 2026.
Singapore law as at 27 September 2026, Year of Assessment 2026, for an individual resident in Singapore who holds the portfolio or policy personally. Home-country rates are the 2026 figures stated on the page.
PPLI.com is a research publisher, not an insurer, broker or financial adviser, and is not licensed by the Monetary Authority of Singapore. Nothing here is an offer of insurance. To buy a policy, deal with an insurer or adviser licensed or exempted by MAS and check it on the MAS Financial Institutions Directory.
Fees first, then tax on a result measured before fees
Alternatives carry two layers of cost. The manager's fees come off the fund's result; the investor's tax then falls on income and realised gains.
The model treats fund fees as not deductible, so where a tax system applies the investor is taxed on a result measured before the fee. For a resident taxed only in Singapore the tax layer is 0 and fees are the whole cost.
For a US person, private credit interest is ordinary income at 40.8% every year, which usually makes it the least tax-efficient asset in the portfolio. That is also where a policy's deferral has the most to work on, but only if the system that taxes you still treats the contract as life insurance; for a US person the insurer, not the policyholder, has to direct the investments.
A hedge fund on standard terms, first year
Hypothetical. Gross return 10%, management fee 2%, performance fee 20% with no hurdle. A fifth of the result arrives as income and 80% of the growth is realised in the year.
Gross return 10.00%
Management fee −2.00%
Performance fee 20% x (10% − 2%) −1.60%
Reported net return 6.40%
Tax, US person 2% x 40.8% + 6.4% x 23.8% −2.34%
Kept, US person 4.06%
Kept, Singapore only 6.40%The tax is worked out on the 10% result before fees, because the fees are not deducted in the model. The first-year figure is before the tax on growth still unrealised at the end, which the Hedge Fund X-Ray adds when the position is closed.
Two instruments, one engine
Hedge Fund X-Ray
Runs management fee, hurdle, high-water mark and performance fee each year, then the investor's tax on the share of the result that is income and on the realised part of the growth. It also solves backwards for the gross return a fund must earn for you to keep a target.
Private credit real yield
Measures a commitment on committed capital: the drawdown ramp, the cash rate on undrawn money, defaults and recovery, fund leverage, the base the fee is charged on, and tax on interest accrued rather than only received.
The tax system
For the UK-return preset these instruments apply one set of annual rates, the rates after return.
Common questions
Are fund fees deductible here?
The model treats them as not deductible: they reduce your wealth, not your taxable result. Where a tax system does allow a deduction, the tax figure here is higher than yours.
What is a PFIC?
A passive foreign investment company under US rules (s 1297). A US person who holds foreign funds directly can fall under a separate regime with its own reporting on Form 8621 (ss 1291 to 1298). The instruments do not model it; they let you set a share of gains taxed as income instead.
Instruments and related reading
Hedge Fund X-RayWhat a hedge fund leaves you after fees and taxOpen →Private credit real yieldFrom stated yield to the yield you keepOpen →Who picks the investmentsInvestor control and what a policy can holdOpen →Tax drag calculatorThe whole portfolio's annual tax costOpen →PPLI.com is a research publisher, not an insurer, broker or financial adviser, and is not licensed by the Monetary Authority of Singapore. This page is general information about how tax systems treat a portfolio and a life insurance policy. It is not an offer of insurance and not advice on any product. A policy from an insurer not licensed in Singapore is outside the Policy Owners' Protection Scheme and outside Singapore statutory nominations.
The authorities this page relies on
IRAS, gains from sale of property, shares and financial instruments
Gains from the sale of shares and financial instruments are generally not taxable, and gains from trading can be. IRAS lists "payouts from insurance policies as they are capital receipts" among gains that are generally not taxable. iras.gov.sg, gains
Income Tax Act 1947 s 13(7A), s 13(1)(za) and s 13(1)(zd)
Foreign-sourced income received in Singapore by a resident individual is exempt, except income received through a partnership in Singapore (s 13(7A)(b)). Dividends paid by Singapore-resident companies under the one-tier system are exempt (s 13(1)(za)), as is interest on deposits with approved banks (s 13(1)(zd)). sso.agc.gov.sg, ITA 1947 s 13
Rev. Proc. 2025-32 and 26 USC 1411
For 2026 the 37% rate applies above US$640,600 of taxable income for a single filer and the 20% rate on long-term gains and qualified dividends above US$545,500. The 3.8% net investment income tax (s 1411) does not apply to nonresident aliens, so it does apply to US citizens abroad. Top combined rates: 40.8% and 23.8%. irs.gov, Rev. Proc. 2025-32
26 USC 1297, passive foreign investment companies
A foreign corporation is a PFIC if 75% or more of its income is passive or 50% or more of its assets are passive. A US person who holds such funds directly falls under ss 1291 to 1298 and files Form 8621. law.cornell.edu, s 1297
26 USC 7702 and 817(h)
A contract is life insurance for US tax only if it meets the cash value accumulation test or the guideline premium and corridor tests (s 7702). A variable contract is not treated as life insurance for any period in which its investments are not adequately diversified (s 817(h)). Withdrawals from a contract that is not a modified endowment contract recover premium first (s 72(e)(5)). law.cornell.edu, s 7702
PRC Individual Income Tax Law, arts 1, 3 and 4
A person domiciled in China, meaning habitually resident there because of household registration, family or economic ties, is a resident taxed on worldwide income (art 1). Interest, dividends and property-transfer income are taxed at 20% (art 3). Insurance compensation is exempt (art 4). chinatax.gov.cn, IIT Law
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