A Platform for Real Estate, Infrastructure, and PE Funds

Professional Fund Management Services

A Platform for Real Estate, Infrastructure, and PE Funds

In the landscape of alternative investment funds, such as real estate, infrastructure, and private equity funds, the Singapore Variable Capital Company (VCC) is emerging as a game-changer. While these funds have traditionally favored closed-end limited partnership structures, the VCC offers unique structural advantages that can prove invaluable in these alternative investment vehicles. Let’s delve into why the VCC is gaining traction in these sectors.

1. Sub-Funds with Customized Assets and Investors

Investor preferences vary, and some may seek the option to exclude themselves from specific investments. This presents challenges in a single blind-pool fund structured as a standalone vehicle like a limited partnership. Contractual protections can only go so far in excluding certain investors from particular assets and liabilities. Here’s where the VCC shines: It enables a higher level of protection by segregating assets into different sub-funds, benefiting from statutory protections under VCC legislation. This means investors can have more tailored portfolios and risk exposures.

2. Embracing Open-Ended Structures

Traditionally, real estate and infrastructure funds have leaned towards closed-end structures due to the illiquid nature of their investments. However, there’s a growing trend toward providing investors with more flexibility to exit, especially when assets stabilize and generate income. With the VCC, while it can serve as a closed-end fund, its adaptable capital structure makes it well-suited for open-ended strategies. Investors can more easily redeem capital at net asset value, enhancing liquidity, and aligning with evolving investor needs.

3. Tokenization: A New Dimension

The VCC’s corporate structure, with investors holding shares, lends itself naturally to tokenization of fund securities. Unlike partnership interests, which are primarily contractual rights, VCC shares can be tokenized as digital securities. This opens up exciting possibilities for liquidity enhancement in alternative funds. Tokenization allows fund interests to be traded on secondary markets, increases divisibility, and lowers minimum investment thresholds. In essence, it broadens the investor pool, making access to these investments more democratic.

The Promise of the VCC for alternative investment funds

The early adoption and embrace of the VCC structure in Singapore’s funds industry are promising signs. Its adaptable capital structure, sub-fund flexibility, and applicability across various fund strategies provide fund managers and investors with unmatched versatility. Notably, the Monetary Authority of Singapore (MAS) actively supports the use of VCCs, offering a grant scheme to co-fund qualifying expenses for establishing or re-domiciling a foreign corporate entity into a VCC.

The VCC’s inherent flexibility accommodates both traditional and innovative fund structures. As more fund managers and investors recognize its myriad benefits, it’s poised to become a staple and an established fund vehicle. The VCC is not just a vehicle; it’s a catalyst for innovation in the world of alternative investments, propelling the industry into an exciting new era.

If you would like to consider setting up a master feeder fund structure or you need help in designing the fund structure, feel free to reach out to us: 

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