Singapore VCC tipped to create new regional investment boom

Singapore’s new corporate structure, the Variable Capital Company is helping to deliver on industry demands for a local product that is both suitable for all types of investment funds and which is also competitive on the international stage.
Singapore VCC tipped to create new regional investment boom

Until this financial instrument was approved in September 2018, Singapore did not have a corporate structure suitable for use as a collective investment vehicle by hedge fund, private equity or real estate fund managers, leaving a significant gap in Singapore’s suite of products. To date, this situation has been circumvented by using offshore structures such as a Cayman Islands Segregated Portfolio Company.

Valérie Mantot

According to Valérie Mantot, global asset manager SANNE’S head of business development – APAC and Mauritius, the new structure, a Variable Capital Company (VCC), provides institutional investors with greater flexibility and cost efficiencies. “For many years the fund industry in Singapore has been frustrated by the lack of flexible and effective products to structure open and closed-ended funds. The ability for managers to run multiple sub funds below an umbrella VCC and to gain the benefit of economies of scale in doing so, should prove to be a very popular characteristic for Singapore’s fund managers,” Mantot said.

The challenge with existing corporate vehicles has focused on onerous requirements around solvency tests, distributions and redemptions, coupled with requirements relating to fixed capital. Financial reporting restrictions on GAAP use were, in some cases, creating a duplication for some managers.


First announced in 2016, followed by public consultation during 2017, VCC’s officially entered the market in 2019. A VCC can be set-up as a stand-alone (single) fund, or an umbrella structure with multiple sub-funds. Having a variable capital basis allows for issuance and redemption of shares at net asset value, and economies of scale exist for umbrella structures with multiple sub-funds.

Funds can have common service providers and share a board of directors. The entity allows for the sharing of economic condition requirements for an ETF scheme between the sub-funds. Singapore Resident Fund (SRF) fund requirements are considered at the VCC-level and not sub-fund level, which is potentially advantageous depending on investor profiles. Additionally, a wider choice of accounting standards is allowed, including IFRS and US GAAP.

“A characteristic distinct from other fund centres, is that a VCC can only be launched by a Singapore -based regulated fund manager,” Mantot said.

In addition, tax relating to the new entity has been brought in line with the exemptions available under the existing Income Tax Act, in relation to income and gains arising from funds managed by a Singapore-based manager. A 10% concessionary tax rate available under the Financial Sector Incentive – Fund Management Scheme, is also extended to incentivised VCCs and an existing GST remission for ETF and SRF funds will be extended to VCCs.


VCC Fund managers need to be registered, licensed or exempted by the Monetary Authority of Singapore (MAS). Those structured as umbrella funds with multiple sub funds, must have the same fund manager for each sub fund.

Each sub fund needs to be registered with the Accounting and Corporate Regulatory Authority and must disclose its cellular structure to third parties with which the VCC is dealing. Other regulatory requirements include the need for the performance of anti-money laundering and combating financing of terrorism duties to be outsourced, to the fund manager of the VCC, with the VCC ultimately responsible for compliance with requirements.


Mantot expects the new VCCs will prove a popular structure for Singapore, particularly for the alternative asset classes. “VCC legislation exempts the need for a fund to have a custodian or depositary where it invests in private equity or unlisted assets.” Mantot said. However, Mantot warns that real estate fund managers should carefully note the requirement for fund managers to be registered, licensed or exempted by MAS, as current exemptions from a license for real estate fund managers do not applicable to VCCs.

This means that in order to manage VCC funds, some real estate managers will need to first work through licensing requirements.

For more information please contact Valérie Mantot, head of business development, Asia Pacific & Mauritius.


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