P-Notes Singapore — Participatory Notes and Offshore Derivative Instruments (2026)

Participatory notes (P-notes) are offshore derivative instruments issued by registered foreign institutional investors that allow overseas investors to gain exposure to a country’s stock market without directly registering in that market. In the Singapore context, P-notes are most relevant to investors seeking indirect exposure to Indian markets (NSE/BSE) via instruments structured through Singapore-based entities. This article is educational and not financial advice.

What Are P-Notes?

P-notes (participatory notes), also called Offshore Derivative Instruments (ODIs), are financial instruments issued by Foreign Portfolio Investors (FPIs) registered with SEBI (India’s market regulator). They allow offshore entities — including Singapore-based funds and family offices — to invest in Indian equities or derivatives without directly registering as an FPI. The P-note issuer holds the actual Indian securities; the P-note holder has a derivative claim on the economic performance of those securities.

How P-Notes Work

1. A Singapore-based fund or investor approaches a SEBI-registered FPI (typically a major international bank or fund house).
2. The FPI purchases the underlying Indian securities on the NSE or BSE.
3. The FPI issues a P-note to the Singapore investor, giving them economic exposure to the performance of those securities.
4. Dividends, capital gains, and losses flow through the P-note to the holder.
5. The Singapore investor does not appear on Indian shareholder registers — only the FPI does.

P-Notes and Singapore

Singapore is a major hub for Asian investment management, and several Singapore-incorporated funds have historically used P-notes to access Indian markets. The Monetary Authority of Singapore (MAS) does not directly regulate P-note issuance (that falls under SEBI’s purview for Indian-market instruments), but MAS-licensed fund managers using P-notes must comply with Singapore’s fund management regulations and anti-money laundering (AML) requirements.

P-notes peaked in popularity in the 2000s as a way for sovereign wealth funds, hedge funds, and family offices based in Singapore and other financial centres to access India without the administrative burden of direct FPI registration. Since SEBI tightened P-note regulations from 2016 onwards — requiring ultimate beneficial owner disclosure and imposing concentration limits — their use has declined significantly as direct FPI registration has become easier.

Risks of P-Notes

• Counterparty risk: You rely on the FPI issuer to hold the underlying securities and honour the instrument.
• Regulatory risk: SEBI has periodically tightened P-note rules. Changes in Indian regulation can affect the instrument’s viability.
• Currency risk: Exposure to the Indian Rupee (INR) even when structured through a Singapore entity.
• Opacity: P-notes have historically been criticised for obscuring beneficial ownership, though SEBI now requires disclosure.
• Liquidity risk: P-notes are bilateral instruments and may not be easily transferable.

P-Notes vs Direct Investment in Indian Markets

Singapore investors seeking Indian market exposure today have several alternatives to P-notes:

• Direct FPI registration: SEBI has streamlined the process; large institutional investors typically register directly.
• Indian market ETFs: ETFs tracking the Nifty 50 or Sensex are listed on SGX and other exchanges (e.g., NikkoAM-Straits Trading India Fund on SGX).
• Feeder funds: Singapore-domiciled unit trusts that invest in Indian mutual funds or FPIs.

For most retail investors in Singapore, Indian market ETFs available on SGX or through platforms like FSMOne are simpler and more transparent than P-note structures. See our Unit Trust Singapore guide for more on fund structures.

MAS Regulatory Stance

MAS regulates Singapore-based fund managers who use P-notes as part of their investment strategy under the Securities and Futures Act (SFA). Fund managers must hold appropriate MAS licences (CMS licence or exemptions) and comply with AML/CFT requirements including knowing their ultimate beneficial owners. MAS works closely with SEBI under a bilateral MOU on regulatory cooperation for cross-border securities activities.