Trend Analysis - 03 September 2021

Proposed Variable Capital Company VCC framework enhancement

Read about the proposed Variable Capital Company (VCC) framework enhancements in Singapore and how they are likely to benefit Single Family Offices, Fund Managers and Asset Managers.

Proposed Variable Capital Company (VCC) framework enhancements are expected to attract more Family Offices into Singapore. The VCC was introduced in January 2020, along with some enticing incentives from the government; There are now reported to be over 200 VCCs set up, with more underway. Read on as our article explores the key benefits of Single Family Offices when managing VCCs, how they provide an increase in structure choice for high-net worth families and individuals, and what the broadening scope of permissible fund managers could mean for SFOs.  

Currently Single Family Offices are not able to manage Variable Capital Companies (VCCs) in Singapore

VCC is an investment vehicle for investment funds in Singapore; It can be formed as a single standalone fund, or as an umbrella fund with two or more sub-funds, each holding different assets.  The current VCC framework provides Fund Manager, Asset Managers and SFOs with numerous benefits, such as division of sub-funds, preservation of corporate history and cost efficiencies. 

Key benefits include:

  1. The division of sub-funds may decrease risks since the assets of one sub-fund cannot be used to discharge the liabilities of another fund under the same VCC umbrella

  2. The VCC can redomicile in Singapore through a registration process, if it includes one or more investment schemes

  3. VCCs can generate cost efficiencies through assigning fund administrators or auditors such as fund managers

  4. The share registry and audited accounts of a VCC are not required to be made public which provides confidentiality

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Potential enhancements proposed in broadening the scope of SFOs to manage VCCs:

Although the timeline hasn’t been confirmed yet, Singapore may be looking to broaden the scope of permissible fund managers to include single family offices that do not fall within this list:
  • Fund managers with a capital markets licence
  • Fund management companies which are registered
  • Certain financial institutions who have obtained exemptions

Broadening the scope of permissible fund managers may allow single family offices (SFOs) to manage variable capital companies (VCCs) and expand the range of structures available to ultra-high net worth families and support their diverse needs when establishing structures domiciled in Singapore. It would likely see Singapore’s attractiveness as a competitive asset and wealth management hub in Asia-Pacific continue to grow; This would in turn generate greater demand for the fund’s ecosystem, including the requirements for service providers such as lawyers, corporate and private client services, fund administrators and custodians.

Increase in structure choice and confidentiality for ultra-high net worth families and individuals

If SFOs are allowed to manage VCCs, the range of structures available to SFOs in Singapore would increase and help support the complex and diverse requirements of ultra-high net worth families and individuals; The change will provide flexibility and confidentiality around established structures which are domiciled within Singapore and provide a peace of mind for long-term wealth preservation in Asia.

In summary

Advisers and ultra-high net worth individuals and families starting to explore and familiarising themselves with SFOs and the VCC structures for incorporating or re-domiciling their funds in Singapore as these are likely to become more prevalent over the coming months and provide attractive benefits.   

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