By Martin O’Regan – Comprising more than 1,000 managers with USD4 trillion of assets under management makes Singapore a leading Asian investment management hub. These impressive numbers demonstrate potential for the ever-changing industry.
A shifting and growing business landscape requires firm leadership, thoughtful insights, reforms, and competency training to ensure the community can continue to capitalise on industry trends. The successful launch and take on of the Singapore Variable Companies Act (VCC) has been the catalyst for a lot of the current growth. With a pro-business regulator marketing locally and overseas, together with the local funds community being strong advocators of the VCC, are the leading reasons for its growing success.
Designed to meet the changing global regulatory trends, VCC’s growth in Singapore since its introduction in 2020 has seen a diverse range of VCC set ups. At Solas, we have onboarded VCCs for family offices, charitable trusts, long/short equity, private equity and venture capital (mainly in life sciences, deep tech and biotech). For VCC to function as a collective investment vehicle, it can be applied as a Master-Feeder structure where VCC is the master and a feeder. For master VCC, it has mainly been applied for Indian focused portfolios to help comply with onshore Indian regulations and a Cayman feeder in the same structure to capture the NRI investment community. We have seen VCC being a feeder into Luxembourg masters and the VCC is also a pooling vehicle for Asian investors.
Singapore’s status as a fast-growing investment hub has a lot of regional and global managers looking for access to Asia via Singapore. This upward trend has Solas engaging in more double taxation work from the private equity and real estate sector. The Singapore Double Tax Treaty furthers Singapore’s global competitiveness — to meet the demands, Solas provides services to help clients meet tax substance requirements for holding companies and SPVs by providing resident directors, facilitating board meetings for investment and divestment decisions and quarterly meetings for oversight and governance of the ongoing operation of those Singapore entities.
We are proactively gearing up for the dynamic investment landscape by improving our infrastructure and product offering. As we anticipate 2022, Solas has developed in-house capabilities for digital assets and Environmental, Social and Governance (ESG), which we see as key drivers going forward. Aside from VCC, sustainable investing will add value to Singapore with the metrics sizing up the sustainability of an investment or business, thus attracting more investors. To better serve digital assets, we have brought in industry experts to help develop our due diligence and onboarding process, upgrade our policies and procedures and revamp our ongoing monitoring for this asset class. We have been involved with the first digital asset fund to be tokenised on the ADDX platform, and this being the first VCC on ADDX was very exciting for us.
With the demand growing from progressive investors and fund managers, it is about building more substantial digital capabilities and regulatory developments to grow Singapore as a digital asset hub.
Fostering Governance, Integrity and Best Practices
With growth comes change; in the past, the roles of independent fund directors were relatively passive, however with the increased level of complexity in the industry, directors must now account for the value they can bring to the board. The growing sophistication of funds will require directors to demonstrate skills in risk, strategy oversight, compliance and investment processes. It is increasingly important to discuss fund directors’ role and effectiveness in protecting the fund and its investors. They are the accountability and independence that investors count on to maintain the integrity of the fund.
This is where the independent fund directors’ knowledge and code of conduct have shifted from a nice-to-have to a must-have. They must understand what works under the current system and what doesn’t. Fund directors provide an oversight function for investors and bring impartiality and experience to a fund’s board and the fund’s affairs and activities. Investors look at the comfort of independence that you are acting on their behalf. Transparency and transparent reporting are what regulators look at; hence, while there is no legislation in VCC for how directors should behave, I have helped set up and chair the Singapore Fund Directors Association (SFDA) to outline best practices that will serve the industry’s interests. The SFDA has developed a Code of Conduct which intends to provide the board of directors of investment fund entities with a framework of principles and best practice recommendations for effective and efficient governance. The framework is also intended to ensure that fund directors demonstrate a high standard of professionalism and ethical behaviour when discharging their obligations. In Singapore, it is still a work in progress and, as a community, we are working on setting high standards in motion.
Gaining unparallel access to the community through industry-led initiatives sets a way forward for professional conduct practices and competency training. The SFDA sets out to be a dynamic facilitator of excellence in fund director practices through education, information sharing or exchange and accreditation.
Revamp of Limited Partnerships
As Singapore strives to create a holistic ecosystem of governance and best practices, the momentum of the private equity market in South East Asia also sees a revamp of the limited partnership regime.
Overseen by a mutual limited partnership agreement, the benefit of a limited partnership is that there is no legal reporting requirement for the return of capital and distribution of profits that you see with companies. While this offers the flexibility of raising capital without giving up control, companies organised as limited partnerships pose particular risks to investors. They do not enjoy the same rights as corporate shareholders.
ACRA’s recent call for feedback to revamp the Limited Partnership Act (Chapter 163B) that governs the establishment of limited partnerships is a welcome move to make the funds friendlier and attractive. This will bolster Singapore’s position as an established asset and wealth management centre.
Working together with regulators and fund management industry associations like SFDA to introduce policy initiatives to enhance further and expand LPs’ appeal makes it a compelling alternative to well-established fund structures in other jurisdictions. Understandably, time to familiarise and accept new policies is needed. Again, how the industry uses these advantages will depend on the efficacy and critical knowledge of the asset management value chain.
What’s Coming
The local asset management industry continues to build capacity and capabilities, securing steady progress, especially during these challenging times. Solas is excited to be a part of it. Our new motto: Leading the Way Forward: Reliable, Relatable and Reputable, continues to signify our commitment to expand our knowledge with well-established fund industry experts in our professional network, growing our experience and reputation. We hope to grow with the industry as it grows for us.
Martin O’Regan
Managing Director
Martin O’Regan is an Independent Director with over 20+ years’ experience and a qualified accountant (FCPA, FCCA). Prior to setting up his own directorship firm at Solas Fiduciary Services, he spearheaded Intertrust Singapore to expand its fiduciary services in Asia. He previously headed the alternative Funds Services in Asia for Deutsche Bank, Citi Fund Services (Bermuda), Apex Fund Services (Dubai) and UBS Fund Services (Cayman Islands and Hong Kong). Martin is licensed as a director with Cayman Islands Monetary authority (CIMA), and Chairman of the Singapore Fund Directors Association (SFDA).
