Fund Management

Singapore’s Variable Capital Companies - The Present And Future

Jaydee Lin 25 May 2020

Singapore’s Variable Capital Companies - The Present And Future

It is easy to forget because of the dramas of recent weeks that Singapore launched a new fund management structure at the start of this year, designed to boost the city-state's wealth management industry. This article looks at what has happened and speculates about what the future holds.

Earlier this year Singapore rolled out a new fund management structure, Variable Capital Companies. VCCs were developed no doubt in part to give the Asian city-state a competitive edge within wealth management against rivals such as Hong Kong. (See some coverage here and here.)

As the mid-point of 2020 comes closer, and after a traumatic period wrought by COVID-19, we take another look at VCCs. The article here comes from Raffles Family Office, one of the major wealth management houses in the region. The author is Jaydee Lin, managing partner. The editors are pleased to share these views and invite replies. To jump into conversation, email and

The 15th of January 2020 represented an important milestone for fund management in Singapore, as it marked the official launch of the Variable Capital Companies framework by the Monetary Authority of Singapore and the Accounting and Corporate Regulatory Authority. Market reaction has already been incredibly positive. Within three months following the roll-out of the VCC, 41 VCC funds have been launched, which is a remarkable and encouraging take-up. We expect the upward trend to continue owing to a myriad of reasons outlined below. 

Game-changer for Singapore’s fund industry
In fact, widespread excitement existed within the financial sector for the new investment vehicle long before the VCC was launched, with many professionals, industry leaders and even Singapore’s Second Minister of Finance describing it as a “game-changer for Singapore’s fund management industry”. But how is this so? And what does it mean for the funds industry moving forward?

What is VCC, in a nutshell?
In a nutshell, the VCC is a new legal structure allowing investment funds to be domiciled in Singapore. Singapore offers a variety of investment fund forms such as the Limited Partnership, Unit Trust, and the Real Estate Investment Trust. Companies, as corporations, are also used as investment vehicles of fund investments. The main aim of the VCC is to overcome existing challenges found in the current fund or Collective Investment Schemes. For example, compared with Singapore’s existing unit trusts, limited partnerships and companies, the VCC will allow for unprecedented flexibility in both distributions and return on investment. 

Its advantages are clear. The VCC enhances Singapore’s competitiveness as an ideal jurisdiction for fund domiciliation due to many of its unique features. Firstly, it allows for both entries into and exits from the fund at net asset value as the act requires the VCC to measure the assets and liabilities at fair value. 

Secondly, the VCC has a very flexible structure suitable for a wide range of investment products. It can either be setup as a stand-alone entity or an umbrella entity with a number of sub-funds under it. To protect investors, the assets and liabilities of each sub-fund are segregated from one another. For investors who value privacy and autonomy, the VCC register of shareholders are not made available to the public. 

Another important feature of the VCC is that it allows for redemption of shares and payment of dividends from its share capital without the need for shareholders’ approval, giving investors ease of liquidity in their investments. A classification of the share or liability will not have any consequences following the removal of the solvency test. For US investors, VCC enables the check-the-box election and allows only one shareholder holding a single asset. The master-feeder structure enables favourable pass-through tax treatment. 

Incorporating a brand new VCC doesn’t take more than 21 days in today’s climate, and VCC allows inward re-domiciliation of existing fund structure and it has made the process very streamlined.

Inspired by international structures
Similar vehicles exist in other jurisdictions, notably the Société d'Investissement à Capital Variable (SICAV, meaning “Investment Company with Variable Capital”) in Luxembourg, the Segregated Portfolio Companies in the Cayman Islands, and the Open-ended Fund Companies in Hong Kong. Indeed, inspirations and best practices from the international funds community has influenced the design of the VCC; it is not a completely brand new structure, but is an improvement from existing ones. The VCC encapsulates the best features of all these fund structures and frames it attractively in a flexible framework.

Some important sources of influence we see are derived from well-established regional initiatives. For example, the Undertakings for the Collective Investment in Transferable Securities, a consolidated EU Directive, has been especially successful since its inception in 1985. It created a set of common rules and regulations allowing funds to register for sale and market across EU member states. The creation for such a scheme provided an effective mechanism for both investors and asset managers to access a single market for financial services in across Europe, which has facilitated capital raising in the region. The investor protection requirement of the UCITS framework also presents a strong appeal to investors.

While offshore economic substance requirements have become more stringent, with the introduction of global initiatives like the Base Erosion and Profit Shifting project and the Multi-lateral Instrument as well as the Economic Substance Law and the Private Fund Law at the Cayman Islands. The VCC represents an onshore alternative without sacrificing any of the benefits. The extension of tax incentives in Singapore such as the 13R and 13X to cover the VCC adds an important tax-planning element to its range of advantages. All in all, the additional commercial substance of the overall VCC fund structure paves the road for further adoption by international players as a compelling alternative to established structures.

The VCC is a huge step forward in enhancing Singapore’s appeal as an international fund management hub, bringing it on-par with long-established and popular corporate structures in international fund jurisdictions. Looking ahead, we are fully confident that the VCC will continue to grow in scale and popularity. Adding to the advantages of the VCC, Singapore’s robust legal framework, transparent business landscape, politically stable environment, and access to 86 global double tax treaties, the VCC will catapult Singapore to the forefront of investors’ minds.

Register for WealthBriefingAsia today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes