SINGAPORE - DBS Private Bank has launched the world’s first multi-family office (MFO) that leverages the variable capital company (VCC) structure to meet demand from ultra-high-net-worth individuals around the world looking to set up family offices here.

Called the DBS Multi Family Office Foundry VCC, it will operate as an umbrella VCC with underlying sub-funds. Clients must invest at least $15 million in managed assets to qualify.

The VCC is a corporate structure for investment funds that can be set up as a standalone fund or an umbrella fund with two or more sub-funds, each holding a portfolio of assets and liabilities segregated from the other sub-funds.

Ultra-high-net-worth families who come under this umbrella VCC structure will have various investment strategies they can choose from to customise their sub-fund.

Under the DBS umbrella VCC, they can also choose to invest in any number of sub-funds.

The sub-funds will be managed by a team of discretionary portfolio managers from DBS, or the families can choose to have a family member or an investment adviser manage the funds.

Mr Lee Woon Shiu, group head of wealth planning, family office and insurance solutions at DBS Bank, said it gives ultra-high-net-worth families an alternative option to manage their wealth in Singapore, without having to establish their own single-family office (SFO).

He said some families may want to start small and thus are not able to meet the requirements for SFOs to enjoy tax exemptions.

Such requisites include employing two family office investment professionals, investing at least 10 per cent of assets under management (AUM) in local investments, and increasing their AUM to $20 million within two years. 

He said the $15 million entry requirement “is not a hard target” compared with the SFO AUM criteria to enjoy the tax exemption.

“In our case, clients will not lose the tax exemption status for that year if they need to withdraw funds for urgent working capital purposes. This is a good in-between solution for them to work with,” Mr Lee said, adding that they can enjoy the tax benefits in the meantime and eventually “set up their own SFO”.

And, because liabilities are segregated under the VCC construct, Mr Lee said having the sub-funds separated will ensure one does not affect another if it runs into issues.

He said rigorous data protection measures are in place, so there is no fear of data leaks.

“Funds are very concerned about data privacy,” he noted, adding that clients’ concerns are that “too many counter-parties get involved in the VCC, when you have an external asset manager who works with third-party custodians or fund administrators”.

The VCC structure, therefore, offers rich families the ability to diversify their investment risks and maintain a level of privacy for their investments in a legalised manner.

VCCs come under the Variable Capital Companies Act, which took effect on Jan 14, 2020, and is administered by the Accounting and Corporate Regulatory Authority.

The Monetary Authority of Singapore regulates VCCs’ anti-money laundering and counter-financing of terrorism obligations.

The DBS MFO VCC will undertake governance and compliance matters on behalf of clients.

Ultra-rich families will also be able to access other investment services – from investment management to trade execution to custody solutions – under the DBS “One-Bank” proposition.

This One-Bank strategy allows customers to have their taxes, legacy and wealth transfer needs, and environmental, social and governance and philanthropic plans taken care of under one roof.

Mr Lee said DBS has received “positive feedback and healthy interest from clients” since it previewed the DBS MFO VCC structure in May.

The bank is currently in talks with “more than 20 clients and prospects across Asia” and aims to onboard 20 to 25 of these ultra-wealthy families by the end of 2023.

More than 660 VCCs have been incorporated or re-domiciled in Singapore as at Oct 14, 2022.

MAS said they include umbrella and standalone VCCs, and represent over 1,300 sub-funds, managed by 420 regulated fund management companies.