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Singapore’s VCC: Thirty Months On and Thriving

16 May 2022

On January 15, 2020, just as health experts were starting to raise concerns about the impact of the coronavirus, Singapore announced the launch of the Variable Capital Company (“VCC”), a new legal entity structure for all investment funds.

The pandemic, as we now know, defied all expectations. It spread at an alarming rate and had a devastating impact on people, along with most, if not all economies, with many going into - or facing - the prospect of a recession.

In many ways, the VCC has also defied expectations, with its adoption going from strength to strength and confirming that a new structure was a long awaited by the industry. Looking back over the last two-and-a-half years, most industry experts agree it has been a game changer for the asset and wealth management industry within Singapore, but also across the APAC region.

It has sparked a significant increase in investment flows coming into the city-state and has helped to propel it firmly onto the global stage as a destination of choice for many fund managers and family offices (aspiring transformation to fund management). Singapore’s central bank announced back in November last year that more than 400 VCCs had been set up, a figure that will no doubt have risen further since then. Australian and Chinese managers have topped the list of those that have ‘flocked’ to Singapore within APAC, while the UK has led the charge among European investors, along with a good number of US managers as well.

What’s the appeal?

Its flexibility, compartmentalization, asset class agnosticism and speed to launch are among the many advantages that the industry has cited as driving the VCC’s stand-out appeal. 

It would be a stretch to say that the trend is purely down to the VCC alone. The ecosystem that goes with it and the open architectural set up of the funds industry in Singapore, which very much includes a willingness to evolve and continue to make things even more attractive, are key factors in that success.

The adoption of the VCC is equally strong within the various sub-classes of the sector - Venture Capital, Hedge Funds (including long-only) and a mix of VCC with Private Equity LP structure.

The demand among institutional clients has been catching up, witnessed only in the last few quarters with insurance companies, global private banks, regional managers and some global managers starting to introduce VCC in the mix of their product suites.

A few months after its launch, various industry associations and the regulator, the Monetary Authority of Singapore (“MAS”), received feedback from the market on both the strengths and areas for improvement of the VCC structure; it prompted the Singapore Funds Industry Group (“SFIG”) – a MAS industry body ­– to begin work on the VCC's second iteration ("VCC 2.0").

Significant updates and enhancements are expected in the next version which is a testament to the forward-looking and nimble approach of the market and the regulator.

What else could add to its appeal?

Opening it up to wider asset classes – real estate, packaging of products through securitization, and perhaps even insurance products, will add to its appeal and open new investment avenues. There have also been calls from the unregulated investment industry, such as Family Offices, for whom the VCC is currently restrictive.

There is still much to do and with the global asset management industry containing to grow, there are a great many opportunities in Singapore to continue to stamp its mark. As Ashmita Chhabra, MD, Business Development – SEA at Apex Group says: “I’ve been serving the funds industry in Singapore, in various capacities, for over two decades, and I can confidently say, it’s never been more exciting and with greater prospects to come.”

Apex Group has a team of experienced, locally based professionals that can provide a single-source solution to global asset managers looking to access Singapore. To find out more about how our services can help your business, contact the team today.

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