VCCs: A Game Changer in Fund Management Industry

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Strategic geographical location and favourable tax incentives are the influential factors that can attract global and regional fund managers to Singapore. Various fund vehicles are available in Singapore to cater different needs of asset owners. In January 2020, the Monetary Authority of Singapore (MAS) together with the Accounting and Corporate Regulatory Authority (ACRA) have launched a new corporate structure called variable capital companies (VCCs). The VCC fund structure serves as an alternative that enables fund managers to adopt wide range of investment strategies. The fund managers can enjoy greater flexibility and achieve economies of scale through consolidation of assets under a single structure. It also helps to generate new business opportunities for third party service providers in the funds ecosystem such as legal firms, fund administrators and audit firms.

Singapore Variable Capital Company (VCC) Structure

Based on the latest asset management survey of MAS, more than 400 VCCs have been set up since the introduction of the framework early in the year 2020. These VCCs are setting up to manage either a single standalone fund or an umbrella fund with multiple sub-funds. The implementation of tax benefits for Singapore fund managers have made offshore jurisdictions less appealing. This will result in an increasing inflows of offshore funds from tax havens like Cayman Islands and Bahamas to Singapore. To further encourage the adoption of VCCs, MAS has implemented a VCC Grant Scheme that provides a grant of up to S$150,000 for each application. Overall, with the increasing number of VCC structures, we can expect the asset under management (AUM) of Singapore to rise even higher than the 17% growth in 2020.

On the other hand, there is a rising trend of setting up single-family offices (SFOs) in Singapore to manage the assets of families. As highlighted by the chief executive of Gordian Capital, Mark Voumard during an interview session with Asian Investors, the MAS is looking to revise its VCC fund structure to expand the use of VCC and allow a wider pool of fund managers including SFOs to setup their own VCC structures. If this is to be implemented in the near future, the VCC structure will definitely help to strengthen Singapore’s competitiveness as a global financial hub.

Conclusion

In the meantime, unless it is qualified for an exemption, all VCCs in Singapore have to be managed by a Capital Market Services (CMS) licence holder or a registered fund management company (RFMCs). Global fund management companies such as Fullerton Fund Management and UOB Venture Management have expanded their footprints in Singapore through the adoption of VCC framework. If you’re considering to set up a fund management company to manage the VCCs, feel free to reach out to us to find out more on the licensing requirements and the application process.

Keep reading: Overview of Fund Management Licences in Singapore

How we can help

Alder offers integrated solutions for clients who wish to set up a fund management company in Singapore which include:

• Offer Professional Advice on the Specific Licence Requirements
• Assist with the CMS Licence Application
• Assist with the Registration as an RFMC
• Review the Submission Documents (Form 1A, Form 3A, Form 11, Form 22A whichever applicable)
• Liaise with MAS on Licence Application-related matters
• Provide On-going Compliance Support Post-Licence Approval

Reference Materials

Joe, M. (2021). ‘Singapore eyes VCC changes to reel in more family offices’, Asian Investor, 2 May. Available at: https://www.asianinvestor.net/article/singapore-eyes-vcc-changes-to-reel-in-more-family-offices/469259

Monetary Authority of Singapore (2021). ‘2020 Singapore Asset Management Survey’. Available at: https://www.mas.gov.sg/-/media/MAS-Media-Library/publications/singapore-asset-management-survey/Singapore-Asset-Management-Survey-2020.pdf