Wanted: Feedback on new framework for investment funds

Feedback is being sought on a new corporate structure for investment funds.

The structure being proposed - the Singapore Variable Capital Company (S-VACC) - will encourage asset managers to consolidate their operations in Singapore by domiciling more of their funds here, National Development Minister Lawrence Wong told a conference yesterday.

Investment funds use three structures now - unit trusts, companies formed under the Companies Act, and limited partnerships.

The S-VACC aims to complement these existing corporate structures with one that is tailored for investment funds, said Mr Wong, who is also Second Minister for Finance.

"We believe this will spur demand for fund-servicing activities such as accounting, legal, custody and tax in Singapore, therefore creating more jobs in the broader professional service sector."

Mr Wong said that the S-VACC structure will offer asset managers greater flexibility and lower costs, as it will cater to both open-ended and close-ended fund structures.

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We believe this will spur demand for fund-servicing activities such as accounting, legal, custody and tax in Singapore...

MR LAWRENCE WONG, the National Development Minister and Second Finance Minister, on the potential of the Singapore Variable Capital Company.

It will also be used for investments across all asset classes, and by both retail and private funds.

In addition, the S-VACC will allow asset managers to achieve cost efficiencies by consolidating administrative functions at the umbrella fund level. This means that sub-funds, with varying risk levels, different investment objectives and classes of investors can be housed under the same umbrella as a single legal entity.

The Monetary Authority of Singapore (MAS) provided more details on the new structure, including how S-VACCs will be allowed to maintain their respective registers of shareholders, although they will have to disclose the registers to supervisory and law enforcement agencies when necessary.

It said that the S-VACC is proposed to be limited to investment fund purposes only, and will be required to have a fund manager which is regulated by the MAS.

Shares of the S-VACC will generally be issued and redeemed at net asset value to ensure accountability and transparency for creditors.

The MAS has also proposed that the incorporation of S-VACCs be governed by a new Act, under which the Accounting and Corporate Regulatory Authority would act as the registrar of S-VACCs, while MAS would oversee the anti-money laundering obligations.

"With the S-VACC framework, MAS seeks to offer a flexible and efficient platform for fund managers to co-locate fund domiciliation with their substantive fund management activities in Singapore and further deepen the asset-servicing ecosystem," said MAS in a statement yesterday.

The public consultation will end on April 24. More details can be found on the MAS website.

A version of this article appeared in the print edition of The Straits Times on March 24, 2017, with the headline 'Wanted: Feedback on new framework for investment funds'. Print Edition | Subscribe