The Monetary Authority of Singapore (MAS) has introduced a new corporate structure for investment funds in a bid to attract more international fund managers.
The Variable Capital Companies (VCC) framework will purportedly give managers greater flexibility in certain operational areas such as redemptions, share issuance and dividend payments. Managers will also be able to incorporate multiple funds in the same VCC in order to reduce costs
The MAS believes its VCC initiative will lead to cost savings and has also set up a three year grant scheme which will provide up to 70% of eligible expenses for registration to encourage wider adoption of the new framework.
In order to mark the launch of the new scheme, a total of 20 investment funds from 18 fund managers that had participated in a pilot program run by the MAS since September were incorporated under the new framework.
The MAS assistant managing director Benny Chey has called the VCC program a “significant chapter in the development of Singapore as a full-service international fund management and domiciliation hub”.
The much anticipated initiative has also been welcomed by asset servicers and fund managers in the region. Anshuman Asthana, the regional head of product management for Standard Chartered Securities Services described as a “game changer for the asset management industry”.
Meanwhile, director at Singapore law firm Morgan Lewis Stamford, Joel Seow, said that while initial adoption will come from private fund managers, retail fund managers should follow “once the VCC structure is more widespread and established”.
Currently, the VCC framework can only be adopted by funds managed by a licensed or registered fund manager. An important driver for future adoption, said Seow, would be the inward redomiciliation of foreign-domiciled funds into Singapore.
One of the first funds to be made available under the new framework is the Pure Alpha Fund devised by Novoscient, a Singapore-based open platform fund manager using an artificial intelligence platform .
Noviscient has partnered with fintech firm Saxo Markets which is providing the technology infrastructure for the fund.
Scott Treloar, Noviscient chairman and chief investment officer said that the fund “comprises a dynamic portfolio of systematic trading strategies sourced from market-neutral hedge funds and trading groups”.
Adam Reynolds, CEO, Asia Pacific, Saxo Markets, added: “Saxo welcomes the introduction of the VCC structure into the market as it enhances Singapore’s position as a global fund management centre. With the VCC, we now have more offerings for fund managers, strengthening our position as a facilitator in the hedge fund and family office ecosystem.”
As part of their European Roadshow in November 2019, BNP Paribas arranged for a panel of experts to talk to our sister publication Funds Europe about the VCC. The panel looked at what the VCC can be used for, the flexibility it offers and why it is potentially of interest to Chinese managers. We recorded a podcast of the discussion that you can access here.
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