The Variable Capital Companies, the new Eldorado of investment funds in Singapore, was tabled in its parliament on September 10, 2018. This marks a significant moment in the city-state’s financial services history. The Monetary Authority of Singapore has also released responses to the bill’s public consultation which finally reveal the details and its mechanics.
The Variable Capital Company - known colloquially as S-Vacc (Singapore Variable Capital Company) is a new legal entity form – a corporate structure for investment funds. It can be used for traditional and alternative fund strategies (both open-ended and close-ended). It can be set up as a standalone or as an umbrella entity with multiple sub-funds. A foreign fund can be redomiciled as an S-Vacc as well.
Investors and product developers at fund houses, asset and wealth management firms are increasingly looking for solutions in the form of investment vehicles in domiciles which confer the most advantages for them. With the introduction of the S-Vacc, it will provide these firms with greater options for fund structuring and flexibility to provide onshore products in Singapore. These funds no longer need to be offshore.
Singapore is viewed as a gateway to Asia-Pacific with its robust regulatory framework, stable government and ease of doing business. The Asia Region Funds Passport will, once implemented, provide a multilaterally agreed framework to facilitate the cross-border marketing of managed funds across participating economies in the region. The S-Vacc will be well placed to rise to the top of this passporting scheme due to its credibility and highly regulated infrastructure
In my role as an independent director, the S-Vacc will be a major game-changer. While retail funds in Singapore always needed onshore providers, fund managers in the alternative space needed to go offshore for lack of a suitable legal entity form in Singapore, hence fund managers were typically looking for governance in the offshore jurisdictions. This will become an irrelevant practice with the introduction of the S-Vacc. With its implementation, many fund managers are already contemplating onshore fund vehicles in Singapore.
There are benefits to the broader fund management ecosystem in Singapore. Together with members of the Singapore Fund Administrators Association (SFAA), we are very optimistic about the implementation of the new structure. The S-Vacc must operate from a Singapore-registered office, employ Singapore-based corporate secretaries and engage Singapore-based law firms, fund administrators, fund managers and auditors. This creates a renewed opportunity for providers on the ground in Singapore.
Singapore’s position as a top domicile of choice for the asset and wealth management industry will be further enhanced by these developments. The introduction of S-Vacc marks Singapore’s latest investment fund innovation to stay ahead of the curve amid increasing global competition for investment.
The financial services industry in Singapore has been eagerly awaiting the introduction of the S-Vacc. We can share with the global funds industry the expertise we have in Singapore together with its forward-thinking regulator.
Martin O’Regan is chairman of the Singapore Fund Administrators Association
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