“The entrepreneur always searches for change, responds to it, and exploits it as an opportunity.” – Peter Drucker

Asia has been a popular destination for the hedge fund industry for many years, though it still remains a much smaller market in AUM terms than the US or Europe. This year has been particularly tough for region, and specifically, the premier centres of Hong Kong, Singapore, and Japan.

The start of the year saw the spread of Covid-19, from the Chinese epicentre, scar the region, which has successfully implemented early measures helping to ward off the level of impact seen in the US and Europe. More recently there has been a strong push to maintain autonomy in Hong Kong, which has now seen China’s grip extended state security across the border, leaving those businesses who have supported the ‘one country, two systems’ policy questioning the long term sustainability of this stance.

A New Opportunity

A hidden jewel for the hedge fund industry within all this turmoil appears to be Singapore. To be clear, Singapore has in no way been a slouch over the years in developing a hedge fund hub in South East Asia. I personally established an investment management firm there in 2007, and over the last 13 years witnessed the inflow of talent and the maturity of the sector firsthand. What I am shining a light on here is the new, fresh out the box, onshore fund structure that Singapore wrote into law at the end of 2019, the Variable Capital Company (VCC).

The VCC structure has been developed by the Singapore Government and MAS, with a significant input from the local service providers, to offer Singapore based hedge fund managers an alternative fund structure to those of the traditional offshore jurisdictions. The approach taken by Singapore has not been without careful analysis of competing fund centres and the final product is hugely compelling on the face of it.

The onshore fund project was initiated in 2012. With the demand and opportunity being recognized by the government and service sector. Armin Chocksey of PWC, referred to on occasion as the Father of the VCC, approached the MAS to explore the possibilities of an onshore fund structure. Today, PWC, with Armin’s firm hand on the tiller, offers a turnkey solution to a manager looking to establish a VCC, coordinating the three practices of corporate services, taxation and legal counsel, as well as compliance training and ongoing audit solution. what makes this product so attractive is the familiarity (for those who have a broader fund operating experience) simplicity and tax efficiency.


There are two legal structures that can be applied to the VCC. A single fund structure or an Umbrella structure. The Umbrella structure is equivalent to a segregated portfolio company, with the ability to form multiple sub-funds. The regulatory framework is also very familiar, with the requirement of a Singapore regulated investment managers license holder extending regulation to the VCC, much like the Luxembourg RAIF structure. Again, as per the Luxembourg RAIF, there is the focus on local service providers delivering the core support, such as the administrator, audit and legal counsel, however, one exception is the prime broker/ custodian, which is not restricted.


To ensure the VCC maintains a tax rate of 0% there are two tax exemptions available the Singapore Resident Fund scheme (13.R Exemption) and 2) Enhanced-Tier Fund Scheme (13.X Exemption).

For the SRF exemption to apply, the requirements are:

  • Regulated Investment Manager.
  • Singapore based service providers.
  • Traded products restricted to the Designated Investment List (in short: no insurance, crypto or commercial property).
  • Fund operation expense greater than SGD 200,000 per year.
  • Investor restriction on Singapore corporates.
  • No minimum AUM.

The ETF Exemption follows much of the same rules as the SRF, but with the additional requirement of three investment professionals and a minimum AUM of SGD 50 million, but benefits from no restriction on Singapore corporate investors.

These requirements may appear convoluted at first glance, but any fund operator will recognize the practicality. The minimum annual cost of SGD 200,00 may raise eyebrows, but it is worth noting that this does include management and performance fees and trading commissions, as well as administrator, audit, and director fees etc.

The cherry on the cake for anyone exploring this option is the Grant scheme offered by Singapore’s MAS, that provides a rebate of 70% of launch the costs, up to SGD 150,000 (excluding the ACRA filling fees) thereby making the VCC an even more attractive proposition from a cost perspective. Though this grant is limited to three VCC products per manager.

Finally, for those already operating established funds, the door to Singapore remains open, The  re-domiciliation of a fund from alternative jurisdiction is possible, though it is important to note that once in Singapore there is no leaving, as corporate entities are restricted from exiting Singapore.

The timing of the launch of the Singapore VCC could not have been better from a competitive standpoint, with Hong Kong in flux and onshore managers cautious of developing offshore products. As the Hedge Fund industry continues to develop in Asia, has Singapore delivered an unbeatable proposition in the region? Only time will tell, but it is looking strong.


To learn how Quay Partners can guide your business to success, contact us for more information.

Quay Partners Group delivers bespoke investment management solutions to independent hedge fund managers and family offices.

Thomas Underwood, the Founder, has over 20 years’ experience in managing and operating hedge funds.