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A new fund structure emerges in Singapore

Published by Charles Gubert

As an international financial hub, Singapore is widely considered to be among one of the world’s leaders, but the country has yet to become a top-tier fund domicile.  Even though some domestic funds do domicile themselves in Singapore, the local market continues to be overshadowed by offshore centres such as the Cayman Islands, Luxembourg and Ireland. However, the Monetary Authority of Singapore (MAS), the country’s financial services regulator, is trying to change this with the launch of the Variable Capital Company (VCC).

The VCC: Taking away some of the offshore pie

The majority of Singaporean funds have historically been structured as one of either unit trusts, companies or limited partnerships, according to BNP Paribas Securities Services. [1] BNP Paribas adds that unit trusts have traditionally been popular among retail and restricted funds whereas companies and limited partnerships have typically been leveraged by alternative investment vehicles (i.e. hedge funds, private equity managers, real estate). [2]

First proposed in 2016, the VCC will be made available from December 2019 to managers of open ended and closed ended funds running either traditional or alternative investment strategies. The VCC’s supporters say the structure could lure more managers to Singapore due to its flexibility and the fact it enables firms to obtain economies of scale more seamlessly by permitting managers to run multiple sub-funds below an umbrella VCC. [3]

A number of leading service providers are backing the initiative too. Standard Chartered, for example, points out the VCC greatly simplifies the fund launch process by negating the need to have in place an “onerous trustee structure,” adding that such products will also be exempted from capital gains taxation. [4] If successful, the VCC could play an instrumental role in convincing local managers to consider re-domiciling their funds to Singapore and away from offshore centres. Moreover, the low set up costs could encourage foreign asset managers – especially those with limited AuM - to structure their funds in Singapore too. [5]

Gaining a foothold in Asia

Practically speaking, the VCC could help foreign asset managers better target cash-rich regional investors at a time when managers are looking to diversify their underlying client pools. This comes also as several APAC markets look to strengthen their fund distribution channels. Two regional cross-border fund passporting schemes are  currently in the works – the ASEAN CIS (Collective Investment Scheme) and Asia Region Funds Passport (ARFP). Both programmes are looking to incentivise regional fund distribution by simplifying some of the cross-border authorisation processes thereby partially replicating the UCITS/AIFMD regimes.

Fund passporting scheme

Impacted markets


Malaysia, Singapore, Thailand


Australia, Japan, Korea, New Zealand, Thailand

While Singapore is not a participatory country in the ARFP, experts speculate the roll-out of the VCC could be an indication that it may well join the programme eventually. If the initiative takes off, the VCC could be one of the funds that is distributed across all of the ARFP members. However, past experiences of APAC passporting schemes do make for some sobering reading. ASEAN CIS – now five years old – is widely seen as a failure mainly because the regional differences in areas such as regulation, corporate governance, taxation and investment culture were too glaring and insurmountable for it to ever succeed. Moreover, some of the markets involved in the initiative also applied FX and capital controls undermining it even further. These inhibitors do not bode well for the ARFP initiative.  

In the context of all of these exciting new developments in APAC, New City Initiative (NCI) has launched a regional branch in Singapore following widespread demand from local boutique asset managers. NCI Singapore will be chaired by Timothy Hay, CEO at Somerset Capital Management’s Singapore office.

[1] BNP Paribas Securities Services (February 12, 2019) The Singapore Variable Capital Company – regulation memo

[2] BNP Paribas Securities Services (February 12, 2019) The Singapore Variable Capital Company – regulation memo

[3] Asian Investor (June 19, 2019) Singapore VCC tipped to create new regional investment boom

[4] Standard Chartered (June 11, 2019) Variable Capital Company : Set for success

[5] Standard Chartered (June 11, 2019) Variable Capital Company : Set for success