The numbers speak for themselves.
Since the establishment of the variable capital company (VCC) fund structure, Singapore has reported that a total of 969 VCCs, both umbrella and stand-alone, represent 1,995 sub-funds that have been incorporated or re-domiciled in Singapore.
However, challenges remain as Asian fund managers seek to integrate their domestic organizations with those in other jurisdictions.
Singapore-based investment manager Tarvinder Charu believes in ensuring regulatory compliance in each jurisdiction, appropriate substance levels to benefit from tax-efficient arbitrage, and overall He said costs are some of the key challenges facing fund managers. To Mr. Auger, director of a law firm, Asian investors.
“VCC has some challenges because it is a young organization,” said Urvi Guglani, associate for strategic initiatives at Silverdale Capital, an international bond fund management firm headquartered in Singapore.
“For example, VCCs are not considered registered funds in some jurisdictions. There is no provision for a management company (ManCo) as required by the European Union’s UCITS regulatory framework, and back-office and middle-office management is It’s becoming difficult.”
Mr Gugulani further added: “Singapore’s service providers are expensive and setting up multiple sub-funds under the VCC framework is costly, especially as audit, legal support and banking options are limited. It’s taking too long,” he added. Therefore, alternative intermediate structures may be required for practical and cost-related reasons. ”
Telvinder Chai
Abacus Capital
Hogi Hyun, founder and managing director of the fund Abacus Capital, said, “Given the short track record of four years, many foreign investors believe that Singapore’s VCC structure is similar to traditional ones such as those in the Cayman Islands.” “We believe it is still relatively new and untested compared to other jurisdictions.” Management and advisory group headquartered in Singapore.
Building cross-border funds also remains a challenge.
“A growing number of jurisdictions are tolerant of fund relocation, but prohibit or complicate relocation abroad,” Gugulani said.
Licensing and approvals required to sell funds to investors are important, and Asian managers often use third-party AIFMs or European managers to raise funds.
Maintaining a presence on the ground and working with local partners within the operating jurisdiction is also essential.
Need a change?
Investment management companies that are not based in Singapore or that do not have MAS-approved fund management regulatory status, including those with detached offices, cannot operate a VCC.
A multibillion-dollar money laundering scandal in Singapore in August 2023 has given new impetus to regulatory scrutiny of family offices in the country.
“As an alternative to the detached office system, VCC fund structures are popular in the wealth management space and have become particularly useful for families looking to start small and remain nimble. recognizes the growing demand for VCC vehicles from families across Asia to serve a variety of objectives, including tax benefits, significant cost savings, and professional management and oversight from experienced investment managers. I realized that,” Hyun said.
Hogi hyung
Abacus Capital
“In Singapore, families may choose to restructure their business ownership from a traditional structure to an institutional ownership structure. This allows the government to reduce the effective tax rate on investment income and capital gains to zero In addition to the tax exemptions offered by , it provides access to a number of international taxation, bilateral investment treaties and free trade agreements.”
Singapore has access to 100 double taxation agreements, 38 bilateral investment agreements, and 22 free trade agreements with various countries around the world.
Looking ahead
The Monetary Authority of Singapore (MAS) It is expected to gather feedback from practitioners and introduce changes to the VCC framework in 2024 or 2025, with the aim of increasing efficiency and utilization as a fund vehicle in which investors can invest directly.
Abacus Capital’s Hyun shared possible future features based on industry feedback.[MAS is considering] Amend existing law to permit fund managers who wish to convert existing funds that are currently structured as companies or unit trusts into VCCs. If this bill is passed, it is expected that interest in and use of Singapore VCC will further increase as a means of asset management for customers to locate their assets in the region. ”
“Beyond Singapore will depend on whether fund management licenses can be used elsewhere.” [also known as passporting], and mutual agreement. We are making steady progress in this regard,” Guglani said.
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