Fund vehicles for Liquid alternatives

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Singapore environmentFund vehicles features

Introduction
Key figures
Useful links

Variable capital companies (VCC)
Limited Partnerships (LP)

Introduction

An array of dedicated regimes for liquid alternative strategies…

Hedge funds and funds of hedge funds (FoHF) can be structured as variable capital companies (VCC) or limited partnerships
Either as a stand-alone or as an umbrella fund with multiple sub-funds

…with flexible rules tailored for specific products and distribution models

No vehicle authorisation required but registration on the list of restricted schemes is possible provided that:
- The offer is made in or accompanied by an information memorandum that contains salient information about the restricted scheme, and
- The manager is licensed or regulated to manage the scheme assets in the jurisdiction of its principal place of business and is fit and proper
No investment or borrowing restrictions
Can only be offered to relevant persons (including accredited investors) or at a minimum of SGD 200,000 per transaction

Sustainable finance: the state of play

According to a survey conducted by the Monetary Authority of Singapore (MAS) in 2020, 40% of assets managed in Singapore incorporated environmental, social or governance (ESG) factors.

In December 2020, the Monetary Authority of Singapore (MAS) issued Guidelines on Environmental Risk Management applying to asset managers and covering governance and strategy, research and portfolio composition, portfolio risk management, stewardship and disclosure. A Singapore taxonomy is currently being developed to strengthen the quality and comparability of sustainability disclosure with a focus on interoperability with foreign taxonomies.

Key figures^₁

197 billion SGD

Of assets under management in hedge funds

78%

Of assets under management sourced from outside Singapore

20%

Of VCCs are hedge funds

Useful links

Fund vehicles for liquid alternatives

Variable capital companies (VCC) – Variable Capital Companies Act 2018 – Singapore Statutes Online (agc.gov.sg) ; CIS-Code-Last-revised-3-March-2022.pdf (mas.gov.sg)

A VCC can be set up as a standalone fund or as an umbrella fund with sub-funds or in master feeder fund structures
A sub-fund’s assets and liabilities are legally segregated from those of other sub-funds and of the VCC itself
It is possible to re-domicile a foreign fund as a VCC
At least three directors are required including one independent director and one local resident

A custodian that is an approved trustee must be appointed
Possible use of International Financial Reporting Standards (IFRS) or United States Generally Accepted Accounting Principles (GAAPs)
A VCC can potentially be eligible for double tax agreements and is eligible for income tax exemptions

Market insight: VCCs are extremely popular recently with fund promoters who can have different strategies for different sub-funds under one umbrella and can therefore – through common functions and providers- reduce tax compliance burden and administrative costs. Recent schemes provide incentives to asset managers to set up a hedge fund based in Singapore or re-domicile their hedge fund back to Singapore.

Limited Partnerships (LP) – Limited Partnerships Act 2008 – Singapore Statutes Online (agc.gov.sg)

Tax transparent vehicle for income tax purpose
Mostly governed (e.g. investment restrictions, removal of the general partner and the manager, distribution waterfall) by the limited partnership agreement
No legal requirement to appoint a local director but a local manager must be appointed if the general partner is not a Singapore resident

Free from legal constraints to return capital and distribute profits
No requirement to make financial statements publicly available
Information on limited partners can be kept confidential if certain conditions are met

Market insight: Despite many common features, Singapore managers often favour Limited Partnerships from other offshore fund centres over Singapore Partnership introduced in 2009.