With the increasing frequency of global capital flows, the establishment of an investment fund has gone beyond simple“company registration“to become a core strategic decision that integrates legal, tax, regulatory and investor relations.
For fund managers, the choice of whether to structure their funds in Singapore, the Cayman Islands or the British Virgin Islands (BVI) will have a profound impact on the fund’s fundraising ability, operational efficiency and long-term growth.
I. Overview of the core architecture:
Three paths, three logics
When setting up an investment fund globally, the choice of domicile is a primary strategic decision. A Variable Capital Company (VCC)in Singapore, a Separate Portfolio Company (SPC)in the Cayman Islands, anda fund structure inthe British Virgin Islands (BVI) are currently the3most commonoptionsconsidered by Asian fund managers.
They representthree different development logics,namely “onshore regulatory hub“,“offshore mature benchmark“and“pragmatic starting point for efficiency“, and are suitable for different fund strategies, development stages and investor groups.
*Click on the large image for details
II. Singapore Variable Capital Corporation (VCC):
Asia-Pacific Hub with Strong Regulatory Backing
1. Regulatory Framework and Market Credibility
VCCisdirectly regulatedby the Monetary Authority of Singapore (MAS) under the Securities and Futures Act and theVCCAct.
This stringent“onshore“regulatory framework has brought it high credibility in the marketplace, especially with institutional investors and family offices in the Asia Pacific region who are concerned about compliance and transparency.the regulatory backing ofMASis acore differentiator forVCCsover traditional offshore structures.
2. Core strengths: tax treaty network and structural flexibility
Extensive network of tax treaties: Singaporehas signed Double Taxation Agreements (DTAs)with over90countries and territoriesworldwide.
This allowsVCCsto potentially enjoy relief from withholding tax on income such as dividends and interest when making cross-border investments, akey tax advantage not available inCayman andBVI.
Umbrella Fund Structure:A VCCcan be set up as an umbrella structure containing multiple sub-funds, each with legally segregated assets, allowing for the operation of different strategies or targeting of different investors under the same platform.
Local ecology and growth momentum:VCCscan apply for Singapore’s fund tax exemption schemes (e.g.13O/13U) and benefit from Singapore’s sound financial ecosystem. Its market acceptance has grown rapidly, withthe number ofVCCsin Singaporeexceeding1,200bythe end of2024, nearly double that of two years ago.
3. Applicable Scenarios
Ideal for fund managers with a strategy focused on Asia Pacific markets, who raise funds primarily from institutions and HNWIs in the region, and who place a high priority on regulatory reputation and tax optimization.
Schematic diagram, source web
III. Cayman Islands Separate Portfolio Company (SPC):
Recognized as the gold standard by global institutions
1. Mature Structure and Global Recognition
The CaymanSPChas been the industry standard for hedge funds and private equity funds for decades. Its most important feature is that it allows for the establishment of multiple“stand-alone portfolios“with legal asset segregation under a single legal entity.
This structure is ideally suited for operating multi-strategy funds, master-linked fund structures or serving different classes of investors.
2. Core strengths and current challenges
Unparalleled investor acceptance: Mainstream global institutional investors in Europe, the US and other countries are extremely familiar with and trust the Cayman structure, and regard it as the standard for fund internationalization, which greatly reduces the cost of explanation and obstacles when raising capital.
Tax neutral but no DTA network: The Cayman Islands itself does not levy income, capital gains or withholding taxes. However, it does not have aDTAnetwork and tax costs may be higher when investing in high withholding tax jurisdictions.
Increasing compliance costs: Caymanian regulation continues to escalate in response to international demands for transparency. For example,the new beneficial ownership regime, effectiveJanuary 1,2025, is more stringent and requires all entities to be registered, significantly increasing compliance complexity and operating costs.
3、Applicable Scenarios
Primarily for managers whose target investors are sophisticated institutions in Europe and the United States, who have complex fund strategies or plan to list in major global financial centers, and who are willing to pay a commensurate compliance premium for such global recognition.
Schematic diagram, source web
IV. British Virgin Islands (BVI) Fund:
A pragmatic starting point for prioritizing cost and efficiency
1. Regulatory Framework: Simplicity and Efficiency
BVIis known for its simplicity and cost-effectiveness in registration, and its Securities and Investment Business Act provides flexible, multi-tiered options for funds.
Among them,the “authorized fund“is a star vehicle designed for start-up, small and medium-sized funds.
2. Core tools:“authorized funds“and“recognized managers“
Approved Funds: Tailored for smaller funds. It has a clear cap (no more than20investorsand no more than$100 millionin size) and dramatically simplified compliance requirements (e.g., non-compulsory custodianship and audits), allowing the fund to launch operations in a matter of days at a very low cost.
Authorized investment managers: a complementary system that provides management companies with a light regulatory platform with quick application and low annual fees,forming an efficient combinationwith“authorized funds“.
3. Core Advantages and Positioning
The core competitiveness of theBVIstructure lies inits extreme operational efficiency and cost control.It provides a“testing ground“for fund managers, especially first-time fund managers or teams with small assets under management, to validate their investment strategies and build up a track record with minimal burden.
It is also tax neutral but has noDTAnetwork. In terms of regulatory reputation, it is benchmarked against“flexible and pragmatic“rather than“global top tier“, and is more likely to besupported bythe founding team‘s “circle of friends“and professional investors who recognize the model.
Schematic diagram, source web
V. Comprehensive multi-dimensional comparison and strategic decision-making
Choosing a fund structure is essentially astrategic trade-off between the three dimensions ofa manager‘s regulatory reputation, operating costs, and structural flexibility. The three structures present clear layering and positioning differences.
1. In the dimensions of regulatory reputation and investor trust
With itsMAS-regulated“onshore“attributes,VCCSingaporehas one of the highest reputations in the Asia-Pacific region and globally amongst investors seeking high standards of compliance.
The CaymanSPChas a global brand name with a long history, and is a passport to the capital of established institutions in Europe and the United States.BVI, on the other hand,is differentiatedby its“efficient and pragmatic“image, which has gained solid recognition among specific investor circles.
2. In the dimension of operating costs and start-up efficiency
The BVIstructure is the most advantageous, with its“approved fund“route enabling a low-cost, fast start-up in a matter of days. CaymanSPCsare at the higher end of the cost spectrum, with high initial set-up costs and increasing compliance costs to meet international standards of economic substance, beneficial ownership transparency, etc., making them the most“heavy“option.
The cost ofa VCCin Singaporeis in between, higher thanBVIbut lower than Cayman, with fees corresponding to the value of local professional services and compliance expenses under high regulatory standards.
3. In the dimension of structural flexibility and strategic adaptation
The CaymanSPCis most capable of supporting sophisticated structures such as complex multi-strategy, master-linked funds.The umbrella structure ofthe SingaporeVCCalso offers a high degree of flexibility and better integration intocross-border investment chainsutilizingthe DTAnetwork.
While the BVIstructure is flexible enough for basic corporate and partnership forms,the “authorized fund“has a clear size cap, which is more suitable for strategically focused early stage development, leaving room for future upgrades.
Schematic diagram, source web
VI. Conclusion: finding optimal fit in dynamic evolution
The global fund regulatory environment israpidly evolvingtowards“transparency“and“materiality“.The rise ofVCCin Singapore,the rising cost ofSPCcompliancein Cayman, andthe improvement ofBVI‘s lightweight regulatory tools have together shaped the current triadic competitive landscape.
For fund managers, there is no such thing asthe “best“structure, only the“best-fit“strategic choice. Decisions should be based on a clear business plan:
If the goal is to establish a top compliance profile, deepen your presence in Asia-Pacific and optimize global tax,VCCSingaporeis the growth option.
For immediate and hassle-free accreditation from established global institutions, and for managing complex international strategies,CaymanSPCremains the industry benchmark.
BVI‘sApproved Fundroute offers an unparalleled and pragmatic starting pointif the core objective is to get started, validate the model and build initial performance at the lowest possible cost and in the fastest possible time.
Ultimately, taking into account your strategy, investor profile and long-term plans, as well as consulting with specialized legal and tax advisors with an international perspective before making key decisions, is a critical step in ensuring that your fund’s structure is both operationally sound today and future-proofed.
Note:The article views are for reference only, financial risk, investment must be cautious, for more details, please contact a professional account manager for your customized solutions.
*Reference sources: SingaporeACRA,MAS, CaymanCiregistry,CIMA, VikingBVIRegistrar,FSC, comprehensive news reports collated, reproduced with attribution, infringement and deletion of contact.
……
👇 Plus V enters Singapore’s largest outbound community 👇
Past Recommendations
