This summary outlines the latest circular from the Monetary Authority of Singapore (MAS) following its thematic review of Variable Capital Companies (VCCs) and their managers. As Singapore’s VCC regime continues to mature, the circular highlights important regulatory observations and supervisory expectations that VCC managers should not overlook. Fund managers, directors, and stakeholders are encouraged to review their current practices in light of MAS’ findings, particularly as regulatory scrutiny increases.
Key Messages at a glance:
- Substantive Fund Management Activity is required. Single investor funds holding illiquid assets remains an area of regulatory concern.
- Directors engaged in regulated activities must be appointed as licensed representatives of the VCC manager.
- VCCs dealing with listed equities and fixed income instruments are required to appoint a custodian.
VCC Landscape: Growth and Profile
- As of March 31, 2025, over 1,200 VCCs have been incorporated in Singapore.
- These are managed by approximately 600 MAS-regulated financial institutions, including fund management companies and banks.
- VCCs are commonly structured for accredited and institutional investors, with exposure to both public and private markets.
MAS Observations and Areas of Concern
While most VCCs and managers are compliant, the MAS review flagged areas requiring attention. Below are key findings and supervisory expectations:
Substantive Fund Management Activity Required
- Some VCCs were found holding illiquid assets on behalf of a single investor or related parties, with minimal active management.
- MAS stresses that merely repackaging investors’ own assets into a VCC is not sufficient, managers must be actively involved in portfolio construction, due diligence, and risk oversight.
- VCCs should not serve as passive conduits or wrappers for pre-existing investments.
Custody Arrangements
- A few VCCs investing in listed securities lacked appropriate custody setups.
- MAS reiterates that custody is mandatory for liquid assets unless exemptions apply (e.g. accredited-only PE/VC).
- Managers must review and formalise custody where necessary.
Director Appointments and Licensing
- Some VCCs appointed directors not formally tied to the manager.
- If these directors perform regulated activities, such as deal sourcing, client servicing, or portfolio management, they must be licensed as representatives of the VCC manager.
Dormant or Empty VCCs
- MAS found a number of VCCs with no assets or investors, despite being incorporated for over a year.
- Managers are expected to regularly assess viability and wind down dormant VCCs to maintain structural integrity of the framework.
AML/CFT Oversight and Accountability
- VCCs remain responsible for AML/CFT compliance, even when functions are outsourced to EFIs.
- Directors must oversee EFI performance and ensure controls are robust and risk-aligned.
- Key requirements include:
- Accurate and updated beneficial ownership registers
- Screening and enhanced due diligence for higher-risk clients
- Timely information sharing with MAS or law enforcement when required
- Ongoing AML/CFT training for directors and EFI staff
You can access the full MAS circular for more information.
Our Take
Singapore’s VCC framework continues to be a flexible and attractive option for fund managers. As adoption grows, so has regulatory scrutiny. To balance investor returns with compliance, fund managers should prioritise active governance, appropriate licensing, and clear demonstration of fund management substance. If you are planning to set up a VCC, reviewing a switch of fund administrator, or seeking clarity on compliance requirements, we are well-positioned to support you through every step of the process.
Contact us to learn more about how we can support your VCC needs.
