MAS unveils framework to lure investment funds into Singapore

It eyes to step up Singapore's position as a full-service international fund management centre.

The Monetary Authority of Singapore (MAS) completed the new corporate structure for investment funds called the Variable Capital Company (VCC) which has been submitted as a bill to the parliament, an announcement revealed.

According to the agency, the bill targets to make Singapore a key fund domiciliation and to step up the city-state’s position as a full-service international fund management centre.

“The new VCC framework will encourage the consolidation of fund domiciliation and fund management activities locally, creating a full-service fund ecosystem in Singapore,” MAS assistant managing director Ng Yao Loong said.
MAS noted that the bill proposes greater flexibility as a VCC can be used by both open-ended and closed-end investment funds, and for both traditional and alternative strategies.

“The variable capital structure of a VCC allows it to issue and redeem shares without having to seek shareholders’ approval, enabling investors to enter into and exit from their investments in an investment fund when they wish to,” the agency explained. “It can also pay dividends using its capital.”

Moreover, a VCC, according to the bill, can work as a standalone structure, or as an umbrella structure with multiple sub-funds fueled by different investment objectives, investors, and assets and liabilities.

“The umbrella structure creates economies of scale as sub-funds can share the same board of directors and common service providers and consolidate some administrative functions,” MAS noted.

A VCC will also be allowed to use Singapore and international accounting standards as they prepare financial statements, making it easier for global investors. Fund managers with foreign-domiciled investment funds may also take advantage of the statutory regime for inward re-domiciliation under the VCC framework to transfer the domicile of their foreign investment funds to Singapore.

Moreover, the framework also provides safeguard against the commingling of assets and liabilities between sub-funds through the requirement to segregate the assets and liabilities of each sub-fund. MAS noted that a VCC will be subject to anti-money laundering and countering the financing of terrorism requirements, and are also required to appoint a fund manager that is regulated by MAS.

“The growth of fund domiciliation activities will create opportunities for a wide range of service providers such as lawyers, accountants, fund administrators, and fund custodians,” Ng commented.

The framework came into finality after the public consultation in March 2017.