Singapore gaining traction among global funds, with 639 VCCs as at end-Aug  

SINGAPORE’S asset management industry has performed well over the last 2 years, and registered healthy growth in spite of the Covid-19 pandemic, said the Monetary Authority of Singapore (MAS).

Responding to queries from The Business Times, an MAS spokesman said: “We continue to see inflows from diversified sources outside Singapore, including North America, Europe, North Asia and South-east Asia.”

Singapore’s asset under management reached S$4.7 trillion in 2020, up 17 per cent from the previous year.

The Variable Capital Company (VCC) structure - with its considerable financial incentives for qualifying fund managers including family offices - has gained market traction despite being introduced during the pandemic in 2020. VCC funds can receive income tax exemptions and the central bank will cover up to S$150,000 of setting-up costs. Based on latest business registry statistics from the Accounting and Corporate Regulatory Authority, there are 639 live VCCs in Singapore as of end-August 2022.

With over 1,100 fund managers operating in Singapore, the VCC provides the fund management industry with a corporate structure tailored for investment funds, offering them greater operational flexibility and cost savings. 

The MAS spokesman added: “Fund managers using the VCC framework benefit from its flexible capital structure, effective segregation of assets and liabilities across sub-funds under an umbrella VCC, and ability to cater to open and close-ended funds. The introduction of the VCC also adds to the toolbox of available fund vehicles, including our limited liability partnerships and unit trust structures.”

Singapore is looking at enhancing the VCC framework so more participants and asset owners can set up the VCCs or convert to VCCs. 

Among the growing list of global investors setting up new offices in Singapore are Chinese top-tier venture capital companies such as China’s Shunwei Capital, Source Code Capital and Vision Plus Capital hoping to seize the potential of South-east Asia’s fast growing enterprises.

Nasdaq-listed investment manager Hamilton Lane is among those that have expanded their presence in Singapore. It has appointed BlackRock’s former Head of Alternatives Distribution for Southeast Asia, Kerrine Koh, to lead the office here.

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The firm, which manages US$832.5 billion in assets, has partnered Singapore-based fintech investment platform StashAway to target a broader set of investors in the region. It is also offering tokenised access to its Global Private Assets Funds through a tie-up with Singapore-based digital securities exchange ADDX.

Hong Kong boutique investment firm, Chartwell Capital, is looking to launch a regional equity fund in Singapore. Its founder and chief investment officer, Ronald Chan told BT during a recent visit to the city-state: “The goal here is to create a new solution for existing clients and prospective clients who want to look for someone they trust to navigate in Singapore. At the same time, get some Singapore-based clients who want to explore Hong Kong, get exposure in China and the Greater Bay Area, where our strength is.” 

Chartwell Capital, which was spun off from a family office, was founded by Chan in 2007. Today, it manages money for endowment and pension funds, family offices, high net worth individuals and charities. The team seeks out overlooked and undervalued investment opportunities using fundamental analysis, which has served it well.

Chan, who espouses a “buy-and-hold and rebalancing approach” for growth and income, said American investor Warren Buffet’s “buy and hold” strategy does not work in Asia.

“Asia has had so much volatility over the past 15 years. If you have a traditional buy-and-hold strategy, you are back to ground zero all the time. You may occasionally have a handful of names in which buy-and-hold allows you to generate magical returns. But most of the time it’s not the case,” he said.

Preferred growth sectors include education, healthcare, domestic consumption and lifestyle. In addition, Chan likes sectors that provide high dividend income such as utilities, infrastructure, traditional manufacturers, property firms that generate rental income, as well as consumer staples and F&B distributors. 

In Singapore, stocks that resonate with him include the Reits, the 3 local banks (DBS, UOB and OCBC), a restaurant chain, a telco and certain software related firms.