Singapore’s Answer to U.S. Web3 Rules: Why Fund Managers Are Turning to Singapore

Singapore has long been a preferred jurisdiction for global capital, prized for its political stability, deep talent pool, and business-friendly regulatory environment. In recent years, one structure in particular has emerged as a game-changer for fund managers and investors alike: the Variable Capital Company, or VCC.

For foreign investors weighing where to base a fund or restructure an existing one, the VCC offers a rare combination of flexibility, tax efficiency, and credibility that is difficult to match elsewhere in Asia, including in the United States, where no directly equivalent structure exists.

What Is a VCC?

The Variable Capital Company is a corporate structure introduced by the Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (ACRA) in January 2020, purpose built for investment funds. Unlike a traditional company limited by shares, a VCC's capital is not fixed. Shares can be issued and redeemed freely without shareholder approval, and the net asset value of the fund can be distributed to investors out of capital rather than only from profits. This mirrors the operational needs of open-ended and closed-ended investment funds far more closely than a conventional company structure ever could.

A VCC can be constituted as a standalone fund or, more powerfully, as an "umbrella" vehicle housing multiple sub-funds under a single legal entity. Each sub-fund maintains segregated assets and liabilities, meaning the creditors of one sub-fund cannot make claims against the assets of another. This ring-fencing is achieved without needing to incorporate a separate legal entity for every strategy, a significant cost and administrative saving for managers running multiple funds or share classes. It is a principle similar to the segregated series concept in a Delaware series LLC, though the VCC framework is purpose-built for regulated investment funds and carries the added weight of MAS oversight, which the US series LLC structure does not carry.

VCCs can be used for a wide range of strategies, including traditional long-only funds, hedge funds, private equity and venture capital vehicles, and even single-family office structures managed through a licensed fund manager. They can be structured as open-ended funds, allowing ongoing subscriptions and redemptions, or closed-ended funds, typical of private equity and venture capital, with a fixed investment period. Crucially, a VCC must be managed by a Singapore-based fund manager that is licensed or registered with MAS, and it must appoint a Singapore-based auditor. Financial statements can be prepared under Singapore Financial Reporting Standards, International Financial Reporting Standards, or US GAAP, giving international investors and managers, including those with US reporting obligations, welcome flexibility.

Why Foreign Investors Should Consider a Singapore VCC

A Fund Structure Designed for Modern Investment Needs

Traditional Singapore companies were never designed with fund structures in mind. The VCC closes that gap. Its variable capital feature allows net asset value and share redemptions to move naturally with the fund's performance and investor flows, without the legal friction that a fixed-capital company would impose. For foreign investors used to structures like the Cayman Islands exempted company or Luxembourg's SICAV, the VCC will feel familiar, while offering the added benefit of a genuine onshore Asian base.

The United States has no comparable purpose-built fund vehicle at the federal level; US managers instead rely on a patchwork of Delaware limited partnerships, Delaware statutory trusts, or series LLCs, none of which carry the same onshore Asian regulatory standing or treaty access that a VCC provides.

Cost Efficiency Through the Umbrella Structure

Upfront Costs - For managers running multiple strategies or investor share classes, the umbrella VCC structure can produce substantial savings by combining multiple entities into one. Rather than incorporating, registering, and maintaining several standalone legal entities, a single VCC can house numerous sub-funds, each with its own investment objective, investor base, and asset pool.

Recurring Costs - Administrative costs such as audit, regulatory filings, and corporate secretarial work can often be consolidated at the umbrella level, while legal segregation of assets and liabilities between sub-funds is preserved. For foreign investors and managers looking to launch several products or test new strategies without the overhead of multiple entities, this is a compelling economic advantage.

Tax Efficiency and Treaty Access

A VCC is treated as a single entity for tax purposes, even where it contains multiple sub-funds. This lets it access Singapore's extensive network of double taxation agreements — one of the most comprehensive in Asia.

Singapore-domiciled funds may also qualify for tax exemption schemes under the Income Tax Act:

• Section 13O — the onshore fund tax incentive scheme
• Section 13U — the enhanced-tier fund tax incentive scheme

Both can exempt specified income from Singapore tax, subject to conditions.

For foreign investors, this can meaningfully improve net returns compared to structures domiciled in jurisdictions without comparable treaty networks or incentive regimes. Singapore's absence of capital gains tax further sweetens the proposition for many investment strategies.

A note for US investors: a VCC is a foreign entity for US tax purposes, and interests in a VCC are typically offered to US persons only through private placement exemptions rather than as a registered public offering. Cross-border tax and securities advice is essential before committing capital.

Regulatory Credibility and Investor Confidence

Singapore is regulated by MAS, widely regarded as one of the most rigorous and respected financial regulators in the world. (COVIS LTD) A fund structured as a VCC and managed by an MAS-licensed manager carries a level of regulatory credibility that can be decisive when raising capital from institutional investors, sovereign wealth funds, and family offices, many of whom face internal due diligence requirements that favour well-regulated onshore jurisdictions over more opaque offshore centres. For foreign investors seeking to attract capital from Asian limited partners in particular, an onshore Singapore vehicle can remove a psychological and compliance barrier that an offshore structure might otherwise present.

This also matters for US allocators: a VCC is not registered under the US Investment Company Act of 1940, so access by US persons is generally structured through exemptions such as Section 3(c)(7) or 3(c)(1), a familiar arrangement for US investors already accustomed to offshore hedge fund and private equity vehicles.

Redomiciliation Flexibility

Foreign funds established in jurisdictions like the Cayman Islands, Bermuda, the British Virgin Islands, or Delaware are not locked out of the VCC framework; instead, they can utilize inward re-domiciliation to transfer their legal seat to Singapore and continue as a VCC. This process is a significant strategic advantage, as it allows managers to maintain continuity without the friction of liquidation, asset transfers, or the loss of historical operating track records. This pathway is particularly attractive to those seeking the substance, credibility, and access benefits of a Singapore presence while avoiding the administrative burden of winding down an existing structure. Please note that this re-domiciliation process is subject to approval by the Accounting and Corporate Regulatory Authority (ACRA) and the Monetary Authority of Singapore (MAS), typically requiring a few months to complete depending on the complexity of the fund’s documentation.

A Gateway to Asian Capital and Deal Flow

Beyond structural and tax advantages, a Singapore VCC positions foreign investors at the center of Asia's growth. Singapore serves as the regional headquarters for a massive share of global asset managers, private equity houses, and family offices; in fact, the city state manages over $4 trillion in assets, with the number of family offices having surged past 1,600 as of 2025. Basing a fund vehicle here provides vital proximity to regional deal flow and co-investment opportunities. Furthermore, you gain immediate access to a world-class ecosystem of professional service providers such as specialized fund administrators and custodians who are uniquely experienced in servicing sophisticated, cross border fund structures.

Support for Family Offices and Private Wealth

The VCC is not limited to institutional fund managers. It has become an increasingly popular vehicle for single-family offices and private wealth structures seeking a robust, tax-efficient, and confidential means of consolidating and managing multi-generational wealth, including US-connected families looking to diversify their holding structures beyond domestic trusts and LLCs.

Note that a single-family office itself does not qualify as a "Permissible Fund Manager" under MAS rules, so it must appoint a licensed or registered fund manager to operate the VCC on its behalf. Combined with the 13O onshore fund tax incentive scheme, a VCC can offer a family office structure that is both commercially efficient and administratively streamlined.

The United States and the VCC: What Foreign Investors Should Know

Unlike Singapore, Ireland, and more recently the Dubai International Financial Centre, all of which have enacted dedicated variable capital fund legislation, the United States has no federal equivalent to the VCC. US fund managers instead work within existing structures such as Delaware limited partnerships, Delaware statutory trusts, and series LLCs to approximate some of the segregation and flexibility benefits a VCC provides natively. This gap is one reason a growing number of US-based managers and family offices are looking to Singapore to house Asia-facing strategies, rather than attempting to replicate VCC-like flexibility within a domestic wrapper.

For US persons investing in a Singapore VCC, it is worth understanding that a VCC is considered a foreign entity for US tax purchases. This is standard practice across most non-US fund jurisdictions and should not be viewed as a barrier, but it does mean that US investors and managers should work with advisors experienced in both Singapore and US cross-border fund regulation to ensure the structure is set up correctly from the outset.

At a Glance: How the VCC Compares

Having covered the case for the VCC in detail, the table below summarizes how it stacks up against the fund structures foreign investors are most likely already using.

Singapore VCC Tax Framework

Charting a Path Forward in Singapore

Establishing a Variable Capital Company involves navigating MAS registration requirements, ACRA incorporation procedures, fund manager licensing considerations, tax incentive applications, and ongoing compliance obligations. While the VCC framework is designed to be efficient, getting the structure right from the outset is essential to realising its full benefits, particularly for foreign investors coordinating across multiple regulatory regimes.

Pearson and Partners specialises in guiding foreign investors and fund managers through every stage of the VCC setup process, from initial structuring advice and MAS liaison, through incorporation and sub-fund design, to tax incentive applications and ongoing corporate secretarial and compliance support. Our team combines deep knowledge of Singapore's regulatory landscape with practical experience serving international clients, including those navigating US tax and securities considerations, ensuring your fund is structured efficiently, compliantly, and with an eye toward long-term growth.

If you are considering Singapore as the base for your next fund, or exploring the re-domiciliation of an existing offshore or US vehicle, contact Pearson and Partners today to discuss how a VCC can work for your investment strategy. Our advisors are ready to help you take the first step toward establishing a presence in one of the world's most trusted financial centers.