The Variable Capital Company (“VCC”) legal entity type was launched in Singapore at the start of 2020 and quickly became one of the most popular investment vehicles amongst fund managers/management firms. Newly adopted by the Singapore government, the Singapore VCC regime is designed to attract more local and foreign-based fund managers to domicile their funds in Singapore.
Positioned as Asia’s leading asset management centre, Singapore is currently well-equipped with approximately $3.4 trillion worth of assets under management (AUM) and 900 registered and licensed fund managers.
How the Variable Capital Company is beneficial in Singapore
Ultimately, as more funds continue to be based in Singapore, the follow-up effect on this will be to attract global institutional investors and high net worth families to invest in the country.
This leads to more fund flows and investment opportunities into the financial ecosystem of Asia Pacific via Singapore. The Singapore VCC regime will also benefit the banks, corporates, and startups who are always on the lookout for new fundings.
Competitive Advantage: VCC vs Other Fund Structures
As compared to other traditional fund structures, the Singapore VCC is a flexible and open-ended fund structure that provides more options for fund managers. In addition to being an open-ended fund, the VCC may also be a closed-ended fund, an umbrella fund, a standalone fund, and more.
Growth of Variable Capital Company Singapore
With the launch of the Singapore VCC regime, the Monetary Authority of Singapore (“MAS”) has provided a financial carrot by way of a VCC grant to push for early adoption. In the first year of launch, 2020 has seen a flurry of new VCC setups – approximately 200 new VCCs have been launched, note the fact that this is in spite of the start of the global pandemic. Leading up to 2021, the momentum has picked up quickly. By the first quarter of 2021, the number of VCCs had already grown to approximately 250 and we will expect to see this growing strongly till the end of 2021 as many more local and global fund management firms continue to show deep interest in using the Singapore VCC structure as compared to going to traditional fund jurisdictions in Cayman or Luxembourg.
VCC Grant Funding in Singapore
The VCC grant by MAS is currently available for Qualifying Fund Managers that have incorporated VCCs or re-domiciled a foreign corporate entity to Singapore as a VCC. The following funding is provided:
Future of Variable Capital Company Singapore
What’s next? The VCC 2.0. The VCC framework is currently being considered by the government to extend its uses for family offices in Singapore.
Eric Chin, CBDO at InCorp, said “There will naturally be a much higher adoption of the VCC structure if this opens up to include family offices that are usually exempted from having a fund management licence to operate in Singapore.”
RHTLaw Asia also added, “The advent of the VCC structure has added another arrow in Singapore’s quiver alongside other corporate and partnership structures aimed at attracting fund managers and family offices to set up operations in Singapore, and from what we have seen to date, the results have been very encouraging.”
Related Read: Why is Singapore chosen for family office setup? »
- The Singapore VCC regime leads to an increased flow of funds into the country. Some of the key benefits are highlighted below:
- Increased attraction of global institutional investors and high net worth families to invest in Singapore
- Increased funds flow and investment opportunities into Asia Pacific’s financial ecosystem
- Benefit the banks, corporates and startups seeking new fundings
- The Monetary Authority of Singapore (MAS) has provided a VCC grant that allows for early adoption of the Singapore VCC regime.
- The Singapore VCC framework is currently under consideration by the government to extend its coverage for family offices in Singapore.