Singapore launched Variable Capital Companies (‘VCCs’) in early 2020. VCCs are corporate entity structures which can hold single or multiple investment schemes. VCCs are tailored to meet the needs of local and global wealth and investment managers.
VCCs form one part of Singapore’s strategy to position the jurisdiction as a leading Asian hub from which wealth managers, investment managers and asset owners (be these corporate or private) can pool their investments. From a base in Singapore, managers can invest across the Asia Pacific region, or into the Middle East, Africa, Europe and the Americas.
We have seen strong demand for the VCCs structure since it was launched on 15th January 2020. A download from the Accounting and Corporate Regulatory Authority website on 2nd Dec 2020 shows nearly 180 VCCs registered. The structure is attractive in its own right, and is made more so by the Monetary Authority of Singapore’s financial incentives to set up or redomicile VCCs in Singapore in the three years following the launch of the structure.
Reflecting on the VCC one year after launch
Now that the VCC has been available for nearly a year, what can the funds’ industry learn from the VCCs launch, uptake and interest in the structure?
Kelvin Sng, ZEDRA’s newly appointed Head of Fund Services in Singapore, explains that if 2020 had been different, there would have been an even greater uptake of VCCs. ‘We have seen a lot of genuine consideration in VCCs, and many wealth and investment managers are interested in exploring the structure for their funds. That said, I think managers were perhaps apprehensive about using a freshly launched structure at a time when many investors seek certainty, and prefer the familiarity of tried-and-tested fund structures. That kind of trepidation around the VCC could continue unless managers can find ways to bring peace of mind to their investors. I expect that fund administrators will increasingly be part of the conversation to help wealth and investment managers cement Singapore and the VCC as natural go-to choices for funds in Asia.’
Investors like peace of mind; fund administrators help provide it
For many investors, more peace of mind is required than usual when investing in funds against the current backdrop of economic uncertainty. For their part, wealth and investment managers are looking to secure capital and appease any investor concerns. Increasingly a fund administrator is seen as one way to bring peace of mind to investors and in some cases, secure their funding.
It’s already not uncommon that investors will refuse to invest in a fund, including private offers, where fund administration isn’t outsourced. Investors like having an impartial party on board, especially from an investment monitoring, compliance and governance perspective. A highly specialised fund administrator like ZEDRA, who has a hands-on approach can be a significant advantage – especially if they will support managers in learning best practices and processes across the end-to-end middle and back-office processes. The result is that investors can rest assured that the fund is properly managed, and governance is overseen correctly. The ability to integrate best practices and protocols into the service standard is also part of the attraction of having a fund administrator.
‘A fund administrator can also help raise the status of the fund, transfer knowledge and best practices, help explain to investors the benefits of the Singapore VCC, and enhance the integrity of the fund’s middle and back-office operations,’ says Kelvin.
Fund administrators: helping add resources and lower overheads
Fund administrators are also helping managers and family offices with resourcing. Managers, compliance departments and COOs can tap into the external expertise of a fund administrator without incurring high overhead costs.
The cost of running a fund is always a key consideration, particularly so this year. This is likely to continue into 2021. At the same time, compliance and governance is increasingly complex, and managers don’t always have the specific knowledge or experience to handle all aspects of compliance in-house.
‘Having a fund administrator is like having an on-demand middle and back-office team at your fingertips. As well as handling the day-to-day fund valuation and administration tasks, we provide other relevant investment compliance and regulatory reports. We can step in as and when our clients need us. Clients don’t have to worry about hiring additional staff within a short period of time to fill a knowledge gap in a fast-changing regulatory environment.’ says Kelvin in conclusion.