December 2019

IQ-EQ event: Navigating a global domicile delicatessen

IQ-EQ_event_Dec_2019Funds Global Asia partnered with IQ-EQ for its ‘Thought Leadership Series’ in Singapore to delve deeper into selecting the right domicile for alternative funds with a panel of experts.
The event, held at the Swissotel The Stamford on November 7, was timely, with the much-anticipated launch of the Singapore Variable Capital Company (VCC), as the Monetary Authority of Singapore, or MAS, starts to structure markets globally. The event – under the investor services firm’s new brand name, IQ-EQ – got underway with an introduction from Jimmy Leong, managing director for funds business in Asia at IQ-EQ. “Today, the options of home for alternative fund managers in domiciling fund structures are immense,” said Leong. “The selection is now very much driven by regulatory, tax, political and structural changes. It is more important than ever to keep abreast of the latest trends influencing the choices among global fund domiciles.” Leong went on to introduce special guest Stephen Diggle, founder and chief executive at Vulpes Investment Management and a well-known name in the Asian hedge fund industry. Diggle began his career in finance in 1986 and co-founded Artradis Fund Management, which was launched in 2002 with a small handful of assets under management that went on to peak at $4.9 billion in 2008. It made $2.7 billion for investors between 2002 and 2009 and the hedge fund finally closed in March 2010. Diggle shared his professional experience stretching back to 2001, when he came to Singapore to set up a hedge fund, and the audience heard about his journey navigating various challenges. The expert view
Following the address from the special guest, the panel of experts took their place on stage to share their insights on selecting the right fund domicile for alternative investment funds. The discussion was moderated by Romil Patel, editor at Funds Global Asia, and panellists included:
  • Kai Schneider, managing partner at Clifford Chance,
  • Wee Hwee Teo, head of asset management and real estate tax at KPMG,
  • Rajesh Sundaresan, chief investment officer of Lighthouse Canton,
  • Sin-Hong Leong, senior vice president of compliance and risk management at Heritas Capital Management,
  • JP Harrop, group head of sales at IQ-EQ and Rajesh Appadoo, client director for funds at IQ-EQ.
Singapore is a growing centre for private markets investments, such as private equity, real estate, private credit and other alternatives. This plays into the hands of established funds houses, as well as limited partners and family offices. Traditionally, family offices were controlled by the family, but with the speed of wealth creation and the growth of family businesses, as well as generational change, this is no longer a part-time or amateur business. Indeed, many of the larger family offices are recruiting chief investment officers from the asset management industry to manage investments. This often involves better-defined legal structures and organisation – or planning. Looking at many family offices, more than 40% of investments are often in private markets, reflecting the more entrepreneurial nature of these offices and the drive for return on assets. Priorities
The panel discussion looked at the primary considerations when choosing a funds domicile, from investor needs to fund structure, tax matters and location of operations. The main factors were broken down into three categories: investor-driven, where the manager is located and the underlying investments. On the investor side, the primary factor is marketability. Whereas US investors may be familiar with jurisdictions such as Delaware or the Cayman Islands, European investors may prefer Luxembourg and regulatory and tax considerations can really drive a decision on domicile. Regulation
Panellists then considered how regulated environments impact on the choice of fund domicile. In the case of Singapore, there is currently no regulated fund regime, but it will happen soon with the introduction of the VCC, which many see as a regulated regime. Having a Singapore structure helps provide many investors with confidence – particularly for many of the family offices in the region. Fund managers like the regulator to be progressive, innovative, open-minded and forward-thinking. When it comes to the main choices for fund domiciles, everything comes down to the investors, who are the key drivers. The two main domiciles globally at present for closed-end funds are Luxembourg and Cayman Islands. While Ireland has made progress in targeting the open-ended space, work still needs to be done in terms of getting structures in place that will work for private equity funds, which is where Luxembourg has benefited. Singapore has experienced a gradual rise, however, with more Singapore-domiciled funds – Singapore Limited Partnership, not VCC – being launched than the Cayman Islands and Luxembourg. On the factors that are likely to influence domicile selection in the 2020s, panellists looked at:
  • Regulation, particularly as a protective measure,
  • Costs, in particular when talking about start-ups,
  • Speed to market – some regulators can take six to nine months or more to approve a new manager, and
  • Capacity.
Despite global issues, experts shared a sense of optimism for the industry in Asia thanks to plentiful capital in China and the wider region, emerging structures and the growth of family offices – particularly in Singapore, which means opportunities for investment professionals and service providers. The event rounded off with a lively question-and-answer session with the audience before contributors and guests mingled atop the Singaporean skyline. ©2019 funds global asia

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