Singapore has grown leaps and bounds with the introduction of the Variable Capital Company (VCC). To many, it’s an attractive legal entity structure that enables local and global managers to incorporate investment funds in Singapore, and positions Singapore as an international fund domicile.
Three years hence, SS&C hosted AIMA Singapore Seminar at our Singapore office in July. Industry experts were convened to discuss how the latest regulatory landscape, including the VCC, impacts the hedge fund managers in Asia Pacific.
VCC structure has gained strong traction with more than 1,000 VCCs registered as of Q2 2023, with roughly half representing private family wealth. The other half is divided between hedge funds and closed-ended private funds. The success of the VCC is a source of envy for other jurisdictions with their own version of a VCC—for example, the Open-End Fund Company (OFC) in Hong Kong, and the Corporate Collective Investment Vehicle (CCIV) in Australia. It is interesting to note that one of the panelists mentioned that some investors prefer the Singapore VCC and nothing else.
The uptake of VCCs also gives rise to various exciting trends in APAC’s hedge fund space. At the closed-door seminar, the panel of experts called out how VCC also fuels the demand for investment fund tokenization and private credit as two key trends to watch out for.
- Investment funds tokenization: Many players are in the process of tokenizing investment funds, such as the VCC, to help accelerate fund distribution, enhance efficiency and improve access. It also helps with their secondary trading—for example, VCC tokens.
- Private credit: The VCC is also being utilized in the private credit space. It's useful for funds to use a corporate vehicle resident in Singapore for Double Taxation Agreement access, sometimes plugging in the VCC within the overall structure to facilitate their investments regionally or globally. This works well because the VCC is a vehicle that can cooperate flexibly with other vehicles.
“A leading investment fund jurisdiction should not only have a robust ecosystem but also offer a variety of investment vehicles to facilitate pooling of investors per their tax preferences and investments across asset classes—VCC is just that!” says Ashmita Chhabra, Independent Non-Executive Director and Chair of Singapore Fund Administrators Association.
Another exciting development is VCC 2.0 in the works, which is planned to be rolled out in late 2024. The goal of the upgrade is to expand the scope of VCC beyond asset management vehicles such as family offices and the real estate sector. This would make the structure more responsive to the requirements of fund managers and investors in today’s fast-evolving markets.
We anticipate that APAC’s appetite for VCC will continue to grow significantly as we step out of the shadow of COVID-19. To learn more about what the future holds for the VCC concept, download our "Singapore VCC Update" whitepaper.
