Introduction
A fund regime with modern structuring alternatives…
- Mutual funds or Exchange Traded Funds (ETFs) can be marketed to all types of investors
- Funds can be structured as unit trusts or Variable Capital Companies (VCCs)
- Specific sets of rules for money market funds, capital-guaranteed funds and index-tracking funds
…with high standards in a business-friendly environment
- Fund management companies must be registered with the Monetary Authority of Singapore (MAS), as a Licensed Fund Management Company (LFMC), Registered Fund Management Company (RFMC), or Venture Capital Fund Manager (VCFM) to carry out regulated activities with various types of investors
- A custodian and local administrator are mandatory
- Subject to standards related to
- Compliance and oversight requirements
- Detailed investment rules (asset eligibility, concentration, diversification, derivatives and efficient portfolio management techniques)
- Borrowing restrictions (10% limit, redemption payments to be made within one month of a redemption request)
- Singapore Financial Reporting Standards and Recommended Accounting Practice (RAP 7), with at least monthly net asset value calculation and disclosure requirements (prospectus, half-yearly financial statement, audited annual financial statement)
- Eligible for the cross border offers of Collective Investment Schemes within the Association of Southeast Asian Nations (“ASEAN CIS”) along with Malaysia, Thailand and Philippines
- Tax incentives schemes are available, subject to qualifying conditions
- A full member of the Organisation for Economic Cooperation and Development (OECD) and Financial Action Task Force (FATF) with an extensive network of double tax agreements and bilateral investment treaties
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 being developed to strengthen the quality and comparability of sustainability disclosure with a focus on interoperability with foreign taxonomies.
Key figures1
Of assets under management
increase in assets under management in traditional segment
Of assets under management sourced from outside Singapore
VCCs incorporated since 2020
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Stock exchange
Local promotion agency
Industry association
Fund vehicles for traditional assets
- No separate legal personality; the trustee is liable for the debt and obligations of the unit trust
- The unit trust property is vested in a trustee who acts as the custodian and follows instructions from the manager
- Unit holders are entitled to a share of distributions. Distributions may be paid out of operating cash flows
- Under certain conditions, including business expenditures of at least SGD 200,000 and a minimum of SDG 50 million of assets under management (amount or committed funds), a unit trust can qualify for income tax exemption on its investments
Market insight: Historically, unit trusts have been the preferred structure for retail funds due to the flexibility they offer for subscriptions and redemptions. They remain a well-known and widely used structure in the domestic market
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
- 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 with fund promoters who can have different strategies for different sub-funds under one umbrella, and reduce administrative costs through shared functions and providers
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[1] Monetary Authority of Singapore