Interview: The VCC fund structure
- Kelvin Tan
- Jan 23, 2024
- 2 min read
In this interview, Gillian Tan, Executive Director of Financial Markets Development at the Monetary Authority of Singapore, discusses the design and strategy behind the novel Singapore Variable Capital Company (VCC) framework.
A corporate structure designed for investment funds, the VCC offers operational flexibility and a competitive tax regime. Unlike other fund structures in Singapore, the VCC allows for varying share capital without shareholder approval and can pay dividends from capital. It is suited for both open-ended and closed-end funds across traditional and alternative sectors.
Tan explains that the VCC framework was designed by adapting best practices from leading global fund domiciles to meet the needs of Singapore-based fund managers. Key factors such as operational flexibility, cost-efficiency, and investor familiarity were central to its design.
The VCC's umbrella structure allows for economies of scale and asset segregation, while also supporting global accounting standards. It enables fund managers to consolidate fund management and fund activities under a single jurisdiction, simplifying regulatory compliance.
This consolidation also leads to cost savings and operational efficiencies. For tax purposes, an umbrella VCC files a single corporate income tax return, regardless of the number of sub-funds.
Tan emphasizes that the VCC is strategy- and asset-agnostic, capable of holding various investment strategies and assets. Since its launch, the structure has been used for funds across venture capital, private equity, hedge funds, and ESG strategies.
The VCC framework is part of Singapore’s strategy to strengthen its position as a leading fund management hub, particularly in the alternatives sector. It offers fund managers the flexibility to grow their businesses and manage alternative strategies from Singapore. The MAS aims to attract more fund managers to domicile their funds locally, supporting the growth of the sector.
Tan notes that while other Asian fund jurisdictions are also launching similar structures, the VCC is designed to complement existing options and expand Singapore’s offerings. To encourage early adoption, MAS has introduced a VCC Grant Scheme to offset setup costs, making it easier for fund managers to transition to this new structure.
Looking ahead, MAS anticipates that the VCC will encourage fund managers to set up new funds in Singapore and redomicile existing foreign funds, further growing Singapore’s fund servicing ecosystem.
The central bank is also exploring the possibility of converting existing fund structures to VCCs.
Read the full interview from Funds Europe here or in the PDF below.
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