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Singapore Focuses On Replacing Hong Kong As Financial Hub



The pandemic is looking at a different kind of rising of some of the most enterprising cities in the world. One of them is Singapore which has now launched a new entity that will ensure it can attract far more hedge funds that it previously was.

Variable Capital Company (VCC) is a structured approach that plans to attract investments from Hong Kong, the Cayman Islands and Luxembourg. Investors worldwide are now planning to move their assets into Singapore as the political situation in Hong Kong remains unstable.

After months of protest of pro-democratic protests that the currently semi-autonomous territory saw, Beijing had finally declared a national security law in Hong Kong in 2019 end.

The hedge fund companies would now look at Singapore as an emerging financial hub, moving themselves from Hong Kong’s unsteady grounding. Singapore and as much as Japan are stepping up efforts to attract investments from the US, Europe and rest of Asia. Japan has made special arrangements to give away free office space, visa waivers and also the provision to fast track licenses as well.

The VCC is designed with the mind to cater to both traditional and alternative investment funds and can be used either as a standalone entity or as an umbrella for multiple funds. The starting point was to first look at low tax jurisdictions in Cayman Islands, Hong Kong and Luxembourg.

For this, the company would lure assets of fund managers and family offices from these regions. But now, other bigger companies and firms are also looking at moving their shop to Singapore.

Singapore is playing its strong regulatory reputation card well right now. Relative to other domiciles, Singapore is providing better and safer working structures. Its government is also offering to offset up to 70 per cent of eligible set-up costs with a cap of S$150,000 ($108,000) per VCC, under a scheme valid until January 2023.

Currently, a school of 70 VCCs are in the process of being launched. Most of them have been set up by small and boutique funds or local family offices. As of now, at least four multibillion-dollar real estate and credit funds with managers based in Tokyo, Hong Kong and Singapore are in the process of registering VCCs. More are expected to follow suit in the coming months.

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