Insight 15 October 2020

Singapore Variable Capital Company (VCC) Current Standing Survey

Sanne in collaboration with AlfaSec Advisors, conducted the Variable Capital Company (VCC) Singapore Current Standing and Survey. Herewith the executive summary.

The VCC was officially launched on 15 January 2020 before the Covid-19 pandemic. Since its inception, 123 VCC funds have been registered with ACRA as of 11 September 2020. The registration process is fairly straight forward and is conducted online. The registration process will take approximately 14 days for most applications and can take up to 60 days when a Transfer of Registration is involved. ACRA maintains a list of VCC funds that have been registered since the inception of this framework and the register is updated and published on a regular basis.

On average 15 new VCC funds are being registered with ACRA each month. 65% of these registrations had been the umbrella fund structure. VCCs are required to appoint a Singapore domiciled fund manager who is regulated by the MAS. Our analysis of the registered VCC funds shows that 67% of Fund Managers are Capital Market Services (CMS) and 27% are Registered Fund Management Companies (RFMC) license holders offering a wide array of investment strategies.

15 On average 15 new VCC funds are being registered with ACRA each month
65% Of new VCCs have been the umbrella fund structure
68% Of the fund management companies originate in Singapore

If we related this to Hong Kong and the OFC structure given that the VCC has only been active for under one year the adoption rate far surpasses that of Hong Kong. We also reviewed the profile of the registered fund management companies. Most of these companies are either Fund Management Companies (52%) or Wealth Management Companies (28%). Most of these target Ultra High Net Worth (UNHW), High Net Worth (HNW) or Institutions as their clients. It is also interesting to note that we see that 68% of the fund management companies originate in Singapore and 32% have their origins outside of Singapore. Size will be important as the cost of operating these structures in times of low interest rate environment, will mean that larger funds will be required to make them viable to both those who operate them and those who choose to serve them.

The results from the survey demonstrates that those who had participated have reviewed and understood the VCC framework, and clearly see and understand the benefits of the vehicle and of Singapore as a location. However, it maybe that the Industry needs to educate the underlying beneficial owners who would use these structures as well as continuing to educate the industry itself. The VCC offers these beneficial owners benefits that are not available to the legacy structures such as private limited companies or limited partnerships. There remains a large proportion of respondents still evaluating VCCs or who currently have no plans to launch a VCC vehicle in the immediate future.”

These scores may be influenced in part by the current pandemic that could be reducing expansionist strategies or inhibiting selective on the ground due diligence activities.

We see that early adopters have been Fund Managers using the structure for Hedge Funds and Wealth Management, however with growing interest from Alternative Managers. There remains an absence of the larger Global Fund Managers and there is limited active re-domiciliation of funds from other jurisdictions. There are factors that are inhibiting Global Fund Managers participation and we highlight these in the report. Singapore’s clean regulatory environment, attractive tax rules and cash incentives coupled with the solid interpretation of international law creates ideal conditions for this structure to grow in importance over time.

Other insights from David Fowler

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