Tantallon Funds – Singapore’s Variable Capital Company structure offer private capital an attractive new vehicle
The Financial Times and others recently reported that multibillion-dollar hedge funds, private equity firms and family offices from Asia, Europe and the US are poised to move assets to Singapore, after the city state launched a corporate structure in January 2020 called the Variable Capital Company (VCC) in a bid to become the region’s leading financial centre.
The VCC is designed to address a gap in the legal infrastructure here for both traditional and alternative investment funds. It is similar to the cellular company structures familiar in the Cayman Islands (Segregated Portfolio Companies), Luxembourg (SICAV) and Hong Kong (Open-Ended Fund), and can be used either as a standalone entity or as an umbrella for multiple funds. The Monetary Authority of Singapore (MAS) has ensured Singapore remains competitive as a legitimate financial centre into the future with the VCC’s incorporate tax-efficient features and regulated under the robust framework of governance Singapore has become known for.
Singapore’s reputation as a financial centre with strong regulatory discipline will be an attraction to funds and family offices looking for a reliable base for the longer term. The government here will continue to monitor developments globally and actively seek to maintain the republic’s relative competitiveness and attractiveness versus alternative domiciles.
From large real estate and credit funds, to smaller funds or family offices, the VCCs already registered cover the spectrum of potential beneficiaries. These comprise assets being relocated from various locations – primarily from Asia, but increasingly, European funds and families are also evaluating Singapore as an alternate base.
Tantallon Capital will be launching new funds under the VCC structure. We also believe these are structures which will be of interest to private capital. In fact, our wealth advisors have reported an increase in enquiries and interest from families and family offices in establishing a base in Singapore. We are also excited that Hugh Sloane and George Robinson will be joining our team. New proprietary capital and existing funds are considering the move partly because of the collaborative but independent platform we offer at Tantallon Capital, but also partly because Singapore (particularly now the VCC has been launched) offers attractive regulatory and cost reasons to be based here.
Singapore’s strong pragmatic regulatory environment provides institutions here a robust and reliable backdrop in the evolving global financial climate. The Cayman Islands, historically a preferred base for a large portion of global fund assets, has been negatively impacted by the EU’s decision in February to add the jurisdiction to its blacklist of non-cooperative tax jurisdictions. While this is expected to be addressed, it has been a reminder that a dynamic and reliable regulator abreast of evolving priorities of all jurisdictions globally should be a critical factor in the calculus of an appropriate domicile for the future.
Singapore’s VCC structure marked the first solid challenge to existing fund domiciles in years. Thanks to the ease of repatriating returns underscored by the ability to pay returns out of capital, a streamlined administrative umbrella that afford balances privacy with ensuring proper oversight is in place, the segregation of assets and liabilities in different sub-funds, and the ability to access tax treaty benefits, the VCC structure provides funds and private capital significant incentives to consider Singapore. VCC fund managers regulated by the MAS and regulatory requirements which include that of proper oversight and responsibility underpins a requirement that substantial activity be based in Singapore. These include anti-money laundering and counter-terrorism oversight obligations. As a whole, the measures implemented will ensure the legitimacy of Singapore, and the fund structures which are established here, over the longer term.
