Coredo

The COREDO team has implemented dozens of structures in Luxembourg, the Czech Republic, Cyprus, Estonia, the United Kingdom, Singapore and Dubai. When entrepreneurs and chief financial officers from Europe, Asia and the CIS come to me with the task of quickly and cleanly launching a fund for professional investors, we often choose the Reserved Alternative Investment Fund: RAIF Luxembourg. It is a tool that combines private-market flexibility, AIFMD compliance, tax efficiency and predictable RAIF fund launch timelines.

Why a RAIF in Luxembourg is advantageous

Luxembourg provides a stable legal environment and predictable law and regulation for RAIF. The RAIF was established by Luxembourg’s 2016 RAIF Law; at the same time the fund does not require direct supervision by the CSSF: the CSSF’s role and oversight are exercised through a licensed management company — an AIFM for the RAIF — which significantly speeds up RAIF registration in Luxembourg and the first closing. This structure allows use of the AIFMD passport for cross-border distribution of the RAIF and marketing the RAIF in the EU to professional investors.

In our practice COREDO uses the launch of a Reserved Alternative Investment Fund for private equity deals in Central and Eastern Europe, direct real estate funds (core/core-plus, value-add) and hedge strategies involving derivatives. The flexibility of the investment mandate and the rapid time-to-market save months and directly support raising AUM.

Regulatory framework: what you need to know

RAIF is managed by an external AIFM authorized in the EU; this is the AIFMD compliance “anchor” for the RAIF. The manager assumes risk management and portfolio management, liquidity control, conflicts of interest policy and the RAIF’s ESG and SFDR compliance. The professional investor requirement precludes retail distribution: the RAIF is intended for well-informed and professional investors under MiFID; RAIF minimum investment thresholds typically start at EUR 125,000, and, upon competence certification, at the AIFM’s discretion.

Capitalization — clear and achievable: RAIF capital requirements: reach a minimum of EUR 1,250,000 within 12 months from launch. Implementation deadlines and monitoring are set out in the fund documentation and are overseen by the administrator and the AIFM.

RAIF structure and investment strategies

The choice of legal form depends on strategy and tax objectives. Most often I recommend SCSp (an unincorporated limited partnership) with an LPA agreement and rights of Limited Partners, where the carried interest remuneration structure and the profit distribution waterfall model can be configured flexibly. For hedge strategies corporate forms with a board of directors and independent directors are convenient – RAIF governance and independent directors increase LPs’ confidence and improve audit.

• RAIF for private equity: growth and buyout deals, possibility of a master-feeder RAIF structure for different classes of investors and currencies.
• RAIF for a hedge fund: RAIF pricing and NAV, often monthly, side-pocketing of illiquid assets is allowed for stressed assets, redemption gates and suspension of redemptions for risk management.
• RAIF for real estate: valuation methodologies for real estate and illiquid assets, an independent valuer and a clear valuation policy and frequency of NAV (quarterly/semi-annually).

Providers and contractual architecture

The solution developed by COREDO to speed up the launch is a “block” of contracts and providers with ready-made SLAs. In such a scheme:

• Registration of the AIFM management company: we take an external EU-authorised AIFM or register a new one (longer and more expensive). Delegation of RAIF management is structured through a management agreement and agreements with the investment consultant.
• Depositary and custodian for the RAIF: RAIF depositary duties include cash flow monitoring, safekeeping and oversight. The depositary agreement is agreed together with the administrator.
• RAIF fund administrator services: maintaining the register, NAV calculation, financial reporting, subscription/redemption of shares (RAIF subscription and redemption procedure), KYC/AML operational processes. registration agent RAIF performs transfer agent functions.
• Independent auditor and NAV audit: annual audit of financial statements and valuation procedures.
• Asset valuation — independent valuer: for real assets and complex private debt portfolios.
• corporate governance: governance committee and investment committee with clear mandates; conflict of interest and disclosure policy – a mandatory element of AIFMD.

Operational AML and KYC procedures

AML KYC requirements for RAIF comply with AIFMD standards and Luxembourg rules. We set up AML risk assessment and control policies together with the AIFM and the administrator, including PEP screening and enhanced Due Diligence, sanctions monitoring and EU sanctions, as well as transactional monitoring of suspicious operations. Investor due diligence for RAIF covers KYC/KYB for institutional investors of the RAIF, source of funds analysis and the beneficial owner and UBO of the RAIF.

Taxes, substance and cross-border structuring.

The tax residency status of a RAIF fund depends on its form. In a “SIF-like” regime the fund is usually exempt from corporate tax and does not claim benefits under double tax treaties; to reduce taxes in portfolio jurisdictions we set up an SPV layer and substance requirements and economic substance (substance documents: office lease, employees, local directors). For private equity and real estate, transfer pricing and the RAIF affect loan and service agreements; we check compliance with the “arm’s length” principle and the TP documentation.

Marketing and distribution: compliance

Thanks to the AIFM, RAIF marketing in the EU uses the AIFMD passport for professional investors, and marketing registration in the EEA is carried out centrally. For a number of markets pre-marketing is used, and, for non-EU jurisdictions, private placement is done under local NPPR. We comply with the public advertising restriction and distribution rules: no retail communications, clear legends and geographic filters.

Liquidity and risk management

RAIF risk and liquidity management: the AIFM function and a documented LRM policy. In closed PE/RE structures, liquidity terms and lock-up periods are specified, as well as the schedule of capital calls and distributions. In open strategies, redemption gates and suspension of redemptions are used as a rare-event tool, and the fund’s liquidity stress-testing is performed against market shock and outflow scenarios.

Currency risks and hedging for RAIF are implemented at the share-class or portfolio level: forwards, NDFs, swaps with counterparty limits. The valuation policy takes into account RAIF pricing and NAV, including FX, fair value and methods for illiquid assets; an independent auditor reviews the approach and the frequency of NAV calculation.

Documentation and procedures

Preparing the offering memorandum for the RAIF sets the rules of the game: description of the strategy, limits, valuation, risks, subscription and redemption procedures of the RAIF, fees, ESG, SFDR disclosures. The management agreement clarifies delegation and AIFM oversight; the depositary agreement and the agreements with the administrator and the registrar/transfer agent establish the control points. Side letters and investor preferences are permitted within the bounds of fairness between classes and without breaching the prospectus.

Timelines and costs — guidance

Our experience at COREDO shows that the launch timeline for a RAIF fund with a finalised strategy and an AIFM in place is 8–12 weeks to soft-close. This includes structuring, opening accounts with the depositary, negotiating agreements, registering in the registers and publishing the offering memo. If registration of the AIFM management company from scratch is required, the timeline is extended by 4–6 months.

The cost of launching a RAIF in Luxembourg depends on the mix of providers and the complexity of the structure. In a typical project the setup and first-year budget comprises legal support for the RAIF, fees for the AIFM, the depositary and administrator, an independent auditor, a registration agent, a valuer (if required), D&O insurance and marketing expenses. As a reference, formation and first-year ongoing charges for COREDO clients typically fall within the average range for institutional RAIFs, and the unit burden quickly decreases as AUM grows. I determine specific pricing after receiving a term sheet on the strategy and operating model.

Timeline and project launch checklist

To ensure process transparency and save time, I use a step-by-step checklist:

1. Strategy, RAIF fund structure, choice of form (SCSp/corporate), tax regime.
2. Economic term sheet: classes, fees, carried interest, waterfall and exit waterfall.
3. Providers: AIFM, depositary and custodian, administrator, auditor, registration agent, independent valuer.
4. Fund documentation: offering memorandum, LPA/articles of association, management agreement, depositary agreement, distribution/placement agreements, subscription agreement.
5. Policies: valuation policy and NAV frequency, risk and liquidity management, AML/KYC, sanctions, GDPR and IT security, ESG and SFDR.
6. Marketing and cross-border distribution of the RAIF: registration in the EEA, private placement outside the EU, restriction on public advertising.
7. Substance: office, local directors, meeting calendar, recruitment compliance for the management team.
8. Reporting and audit: annual audit, audit approval and annual general meeting, CSSF notification via the AIFM.
9. Finance: transaction costs and ongoing charges, currency policy, hedging, banking and brokerage agreements.

COREDO case studies: solutions in practice

Recently the COREDO team launched a RAIF for private equity with a focus on buyouts in the EU industrial sector. We selected an SCSp, set out carried interest with a European waterfall, and implemented a master-feeder for multi-currency fundraising. For liquidity management we provided capital calls by deal stages, and for tax purposes – an SPV in contractual jurisdictions with substance and TP documentation. The investors’ committee received independent members, and the AIFM adopted a risk policy and SFDR disclosures under Article 8.

For a hedge strategy with liquid instruments, the solution developed at COREDO included daily pricing of key assets by a price provider, monthly NAV and strict counterparty limits. We built in liquidity stress-testing, FX hedging of classes and a suspension policy for extraordinary conditions. LPs received a transparent reporting pack and a clear fee model.

Secondary sales and investor exit

Exit strategies of RAIF investors depend on the structure. In closed-ended funds this is a waterfall distribution after exit from the portfolio; in open-ended funds: redemptions according to the rules and frequency described in the prospectus. If necessary, a secondary-market sale of a stake is permitted: transfer of an LP’s interest with the consent of the GP and AIFM and updating the registers with the administrator. We add these mechanics in advance to the LPA and subscription agreements so as not to restrict the transferability of interests.

Where difficulties most often arise

Benefits of RAIF for the investor

Benefits of RAIF for investors consist of three components. First, Luxembourg’s legal regime, the stability of the legal environment in Luxembourg, and AIFMD compliance through an AIFM with clear roles for the depositary, auditor and administrator. Second, flexibility of the remuneration structure (carried interest and waterfall), governance and independent directors, committees and clear LP rights (LPA, side letters within the framework of fairness). Third, tax efficiency at the fund and SPV level, well-considered currency hedging and predictable Ongoing charges.

Why I recommend RAIF and COREDO

RAIF is an instrument that combines speed to market, the AIFMD distribution passport, a flexible structure for private equity, hedge funds and real estate, and a transparent compliance regime. In COREDO projects this is expressed in a controlled timeline, a clear budget, predictable regulatory steps and investor trust even before the first closing.

The European ELTIF is precisely such a tool. With the entry into force of ELTIF 2.0 in January 2024, it became closer to retail investors and more convenient for asset managers. Over the past months the COREDO team has carried out several ELTIF launches and restructurings in Luxembourg and Ireland, adapted processes to the requirements of AIFMD, MiFID II, PRIIPs and SFDR, and established transparent AML/KYC procedures for investors from Europe, Asia and the CIS. In this article I summarize our experience and provide a compact yet thorough guide – from fund design to income distribution and liquidity management.

What is ELTIF 2.0 and what has changed for retail investors?

ELTIF – European Long-Term Investment Fund: a regulated EU alternative fund for investments in illiquid assets: infrastructure, the real economy, private equity and private debt. Version 2.0 (Regulation (EU) 2023/606, amendments to 2015/760) removed the main barriers for retail investors: the minimum amount of 10 000 EUR and the “10% test” for portfolios under 500 000 EUR were abolished. Now ELTIF accessibility for retail investors has become a reality, and the requirements for suitability and product governance have moved under the MiFID II framework.

COREDO’s practice confirms: these parameters allow building a realistic ELTIF portfolio structure with a balance of returns and control of illiquidity.

ELTIF vs UCITS: different objectives – different liquidity

Comparing ELTIF vs UCITS is important already at the product positioning stage. UCITS provide predominantly liquid markets, daily valuation and redemption, but rarely open access to infrastructure projects or private equity. ELTIF, by contrast, is built around long-term investments and may have a limited or closed redemption regime. In our experience, for wealth managers and private banks it is rather the strategic core of ‘alternative’ and real assets, while UCITS cover the liquid layer of the portfolio.

Marketing and passport in the EU: how to distribute ELTIF

The European ELTIF passport and passporting across the EU operate through AIFMD mechanisms. Manager: authorised AIFM: submits a notification to the national regulator, and the fund becomes available for cross-border ELTIF distribution in Europe. Consistency of the prospectus, UCITS-style disclosure for retail and compliance with MiFID II requirements on the target market, product governance and the suitability test are important. ESMA recommendations on ELTIF and technical guidance clarify the approach to liquidity, valuation and pre-contractual disclosures, and the European Commission rules on ELTIF set the overall framework of the 2.0 reform.

Access for retail investors: how to invest in ELTIF

Entering ELTIF for retail investors has become easier. The process typically includes onboarding: eKYC, eID and electronic signature, MiFID suitability/appropriateness questionnaires, provision of the PRIIPs KID, and signing subscription agreements. At COREDO we have built a digital route with AML and KYC requirements for investments in ELTIF, including enhanced Due Diligence for high-risk investors and checks of beneficial ownership registers. For clients from Asia and the CIS we add CRS and automatic exchange of information to avoid surprises in reporting.

Minimum amount, fees and expenses

ELTIF 2.0 removed the regulatory minimum entry threshold, so the minimum ELTIF investment amount is now determined by the prospectus and the distribution policy. We often see a range from 5 000 to 25 000 EUR for retail and from 100 000 EUR for professional tiers. ELTIF fees and expenses are transparent in the KID and prospectus: fixed management fee, possible performance fee, structural expenses, depositary, audit, custody and administration. Compensation structures for ELTIF managers include a hurdle rate, carried interest and performance fee mechanisms, and the waterfall distribution and payment priority are detailed in the LPA/prospectus, including clawback provisions.

Liquidity for retail investors: tools and limitations

The main question is ELTIF liquidity for retail investors. ELTIFs are illiquid by nature, but 2.0 allowed buyback mechanisms before maturity: redemption windows, matching of secondary orders and liquidity management tools. Liquidity management in ELTIF uses redemption gates, suspension and lock-up periods, side pockets for troubled assets, as well as swing pricing and NAV adjustment on inflows/outflows. The secondary market for ELTIF units is developing: exchange listings are still rare, but secondary-market platforms for units of alternative funds and broker ‘notice boards’ for deal matchmaking are emerging.

Taxes: structure matters more than the rate

Taxation of investments in ELTIF is not harmonised at the EU level and depends on the jurisdiction of the fund and the investor. Tax efficiency of an ELTIF for international investors is achieved through structuring via SPVs and holdings, using tax treaties and avoiding double taxation. At COREDO we model flows in advance, taking into account withholding on coupons/dividends, CFC rules in investors’ countries and ‘pass-through’ regimes in Luxembourg, Ireland or Malta. For HNWIs and family offices we often create bespoke tax memoranda and accompanying information-exchange agreements.

ELTIF portfolio structure: eligible assets, diversification, leverage

ELTIF leverage restrictions are tied to whether the marketing is to retail investors or to professionals only, and subscription lines and leverage in ELTIFs are allowed within the risk policy and AIFMD limits.

Investment opportunities: infrastructure and private markets

investment opportunities in ELTIF infrastructure are especially in demand amid the energy transition and digitalization. We structured an ELTIF with a portfolio of brownfield transport and energy projects in Central Europe, adding a share of greenfield with staged capital calls and construction insurance. Private equity investments through ELTIF cover buy‑out and growth stages, as well as private debt for SMEs, where returns are generated through coupon income and arrangement fees. Benchmarking: ELTIF versus private equity and infrastructure funds shows comparable returns with better transparency and European supervision.

Valuation, NAV and tools for illiquid assets

NAV valuation issues in illiquid ELTIFs are addressed through independent valuation of alternative assets and model validation. ESMA recommends stress tests and portfolio scenario analysis to show the impact of rates and credit spreads, as well as liquidity management under shocks. Side pockets and handling of illiquid assets help isolate problematic positions, and swing pricing adjusts investor entry/exit to protect existing unitholders. Our experience at COREDO has shown that a clear valuation methodology and oversight by an independent valuer simplify audits and reduce dispute risks.

Governance, legal aspects and AIFMD

The legal aspects of ELTIF registration are tied to AIFMD: manager — a licensed AIFM, depositary – with full oversight and depositary responsibility for safekeeping/recordkeeping. Custody and the role of the depositary in ELTIF require clear SLAs and monitoring of conflicts of interest, and regulatory supervision and ELTIF audit include regular disclosures, Annex IV reporting and an annual audit. We record regulatory changes and the compliance roadmap in a compliance calendar with checkpoints for ESMA technical guidance and internal policies on best‑practice compliance governance.

Jurisdictions and corporate structuring

Registering an ELTIF manager in Luxembourg or Ireland is the most common choice, but Malta remains a workable alternative. Onshore vs offshore funds: EU advantages: transparent supervision and a marketing passport; disadvantages: higher administration costs compared to offshore SPCs. Structuring via SPVs and holding companies allows addressing tax issues, subordination and local licensing; structural subordination and credit risk of SPVs are accounted for in the credit documentation and covenants. For investments outside the EU we add local SPVs with arrangements on security and a cash sweep in the waterfall.

Documents, fees, waterfall and capital calls

Preparing the prospectus and key documents includes: constitutive documents, offering memorandum, PRIIPs KID, SFDR disclosures, risk and liquidity policies, target market and product governance documents. Subscription agreements and legal documents carefully reflect the mechanics of investor contributions, capital calls, default procedures and penalty interest. The waterfall and income allocation in an ELTIF detail payment priorities: return of capital, hurdle rate, catch‑up and carried interest; we often add an escrow mechanism and definitions of “realised proceeds” to avoid ambiguity. ELTIF fees and expenses are disclosed according to PRIIPs KID disclosure requirements for retail investors.

Suitability, marketing and distribution channels

MiFID II and suitability assessment when selling ELTIFs are critical for stable distribution. Marketing notices and UCITS‑style disclosure are adapted to local regulator expectations, avoiding aggressive yield promises. Distribution channels: banks, private banks, wealth‑tech platforms and licensed distributors; integrating ELTIF into wealth management solutions helps build a “core‑satellite” model where ELTIF is a long‑term core of alternatives. COREDO helps align ELTIF passporting and marketing across the EU, including regional restrictions on sales outside the EU and working with investors from Asia and the CIS through local NPPR regimes or Reverse Solicitation.

ESG and Sustainable ELTIF: from SFDR to real impact

Sustainable ELTIF and SFDR require alignment: classification under Articles 8/9, PAI indicators, sustainability measurement methodologies and reporting. Greenwashing risks and the control of ESG claims we mitigate through project KPI matrices, external verification and harmonization of wording with the depositary and auditors. In infrastructure, ESG metrics are integrated into credit covenants and financing terms; this simplifies subsequent refinancing and increases the asset’s value at exit.

Tokenization, digital fund units and the secondary market

Tokenization of fund shares and blockchain solutions increase operational efficiency and the transparency of the register of fund units. ELTIF tokenization and digital fund units are implemented through the DLT laws of individual EU countries, and it’s important to distinguish regulation of digital assets and MiCA in the context of ELTIF: tokens representing a fund share are not equivalent to crypto-assets under MiCA. Secondary market platforms for alternative fund units already allow organizing matching and periodic auctions, which support liquidity and reduce the cost to the investor in the case of an early exit. The solution developed by COREDO combines eKYC/eID, electronic signature, AML monitoring and a secondary trading module with restriction controls.

ELTIF risks for private investors and how to manage them

Key risks: illiquidity, valuation and NAV recalculation, credit risk of borrowers/projects, leverage limits, operational risks and cybersecurity. ROI assessment and performance metrics for ELTIFs include IRR/TVPI/DPI and scenario analysis, stress testing and portfolio scenario analysis for rising rates and multiple compression. Exit strategies and ELTIF redemption windows require discipline: pre‑agreed periods, matching mechanisms and communication with retail investors and the KID.

COREDO case studies: from design to distribution:

Infrastructure ELTIF in Luxembourg. The COREDO team implemented a structure focused on brownfield assets of transport and energy infrastructure in Central Europe, integrated independent valuation and side pockets, and established quarterly redemption windows with limits. Passporting to Germany, Italy and Spain, channels: private banks and licensed platforms.

Private debt ELTIF in Ireland. Our experience at COREDO has shown that using subscription lines and soft leverage up to 40% of NAV accelerates capital deployment without loss of diversification. We established independent loan valuation, stress‑tested for rising rates and developed a waterfall with a hurdle rate and transparent carried interest.

Integration of ELTIF into wealth solutions. For a network of wealth managers and private banks we prepared target market and product governance documents, KID in several EU languages, as well as a MiFID suitability procedure. Clients — family offices — received a clear due diligence model when investing in ELTIF and regular SFDR reports.

Due diligence: checklist for managers and investors

COREDO’s practice confirms the value of systematic DD. We use a due diligence checklist for managers and investors:

• Manager and governance: AIFM license, Board independence, conflicts of interest policy.
• Strategy and pipeline: eligible assets list, geographic scope, co-investment, ELTIF regulatory restrictions.
• Risks and liquidity: liquidity management tools, redemption policy, stress tests, NAV valuation, independent valuation.
• Finance: ELTIF fees and expenses, waterfall structure, hurdle rate and carried interest, ROI scenarios.
• Operations: depositary and oversight, custody, cybersecurity and backups, operational risks.
• Legal and tax: prospectus, subscription agreements, Annex IV, double taxation and tax treaties.
• ESG: ESG standards and disclosures under SFDR, monitoring greenwashing claims.

Enforcement and disputes: what to expect

Legal disputes and precedents regarding ELTIF are still rare, but issues usually concern valuation, disclosures and liquidity. We include arbitration clauses, a procedure for an independent revaluation and clear definitions of liquidity events. For regions outside the EU we comply with sale restrictions and NPPR regimes, and also document reverse solicitation to minimize regulatory risks.

Macro factors, refinancing and flow management

We take the impact of macroeconomics and the interest rate on asset valuation into account in our models: duration of infrastructure cash flows, sensitivity of PE multiples and cost of debt. We plan capital inflow/outflow management and the refinancing market in advance: subscription windows, synchronization of capital calls with the pipeline and covenants on project refinancing. For investors this means a more stable strategy implementation and predictable communication about the payment schedule.

ELTIF for investors from Asia and the CIS

Investors from Asia and the CIS value European supervision and the ELTIF European passport. We take into account local rules and currency regimes, set up AML Enhanced Due Diligence, ensure CRS reporting and ownership transparency through beneficial owner registers. Where sale outside the EU is restricted, we use cooperation with local licensed partners or reverse solicitation mechanisms, without breaching the regulatory framework.

Best-practice compliance governance for managers

The solution developed at COREDO includes: a matrix of regulatory obligations under AIFMD/ELTIF, an Annex IV calendar, internal LMT policies, regular reports to investors and UCITS‑style disclosures. For risk assessment we apply stress tests, default SPV scenarios, structural subordination and credit risk analysis, as well as IT controls and cyber backup. Such a «framework» increases trust and simplifies work with auditors and the depositary.

• More accessibility: no regulatory minimum, clear KID and MiFID‑processes.
• More portfolio flexibility: broader eligible assets, reasonable diversification.
• More realistic liquidity: redemption windows and LMT with clear disclosure.
• Stronger focus on disclosures: PRIIPs KID, SFDR, ESMA guidance and product governance.

Conclusion: how to move forward

ELTIF 2.0 has become a mature tool for international investors and asset managers. For companies from the EU, Asia and the CIS it opens access to infrastructure, real assets and private markets with a European level of protection and transparency. It is important to soberly assess illiquidity, properly structure taxes and build operational discipline; then an ELTIF becomes not just a “long‑horizon fund” but a stable anchor for a portfolio.

The COREDO team has already helped launch and adapt such structures in Luxembourg, Ireland, Cyprus and Estonia, and also integrate them into banks’ channels and wealth platforms. If you need a roadmap for ELTIF — from choosing a jurisdiction and a depositary to product governance and cross‑border distribution — I’ll share practical templates, checklists and examples. Mature design, transparent disclosures and a demanding approach to risk are the three pillars that underpin a quality ELTIF, and that’s exactly how I am accustomed to building solutions together with COREDO.

When I launched COREDO in 2016, my goal was simple and ambitious: to give entrepreneurs and capital managers from Europe, Asia and the CIS a reliable path into the complex world of international structuring, licensing and compliance. Since then the COREDO team has implemented dozens of fund projects: from the EU and the UK to Singapore and Dubai — and I can clearly see how the Variable Capital Company (VCC) in Singapore is changing the game for hedge funds. This article is a distillation of COREDO’s practice: what works, where the pitfalls are, and how to achieve maximum operational and tax efficiency from a VCC in 2026.

What is a VCC, and why choose Singapore?

Variable Capital Company (VCC), is a Singaporean form of fund organization, developed specifically for the needs of investment structures. Unlike a traditional company, a VCC allows variable capitalization: a fund can freely issue and redeem shares at net asset value (NAV), simplifies the distribution of income and the range of share classes, and also allows operating a structure in an umbrella fund structure with sub‑fund segregation. For hedge funds this is the equivalent of a Swiss Army knife: flexibility, speed and control over liquidity.

The regulator MAS builds frameworks through the Securities and Futures Act (SFA), supplements them with MAS guidance VCC, and the tax infrastructure relies on a wide network of double taxation agreements. As a result, the VCC in Singapore becomes a logical choice for hedge funds, especially when institutional acceptability and readiness for Due Diligence by prime brokers and banks are required.

VCC architecture: umbrella and sub-funds

VCC supports an umbrella fund structure with multiple sub‑funds. Each sub‑fund forms a separate segregated portfolio: the liabilities of one sub‑fund do not legally transfer to another. In real COREDO projects this allows isolating strategies (for example, market neutral and event‑driven) and creating different share classes by currency, fees and liquidity for different investor profiles.

The liquidity and variable capitalisation of a VCC allow organizing subscription and redemption mechanics with gate provisions and side pockets for complex or illiquid assets. I always recommend documenting capital reduction procedures and variable capital processes so that the Administrator and Custodian can execute them without manual workarounds. This is the foundation for robust liquidity management, especially when using leverage and derivatives.

For hedge funds, the flexibility of the VCC is revealed through capital flexibility and share classes: you can launch both open‑ended and closed‑ended VCCs, and if necessary – convert or launch parallel classes for new mandates. Our experience at COREDO has shown that properly structured classes can reduce conflicts of interest between investors with different liquidity windows and lower operational risks in stress scenarios.

Manager licensing

Key question: what licences does a fund manager need in Singapore. Depending on the strategy and investor base this is the Capital Markets Services (CMS) licence for fund management or the Registered Fund Management Company (RFMC) regime. CMS suits large-scale managers and allows a broader range of activities; RFMC is a simplified regime for managers with smaller AUM, but with limits. The solution developed at COREDO typically combines an assessment of target investors, marketing geographies and derivative instruments to determine the least sufficient regime.

For retail funds – different thresholds and requirements for a depositary/trust structure; for professional and institutional funds, more flexibility but not less responsibility. The COREDO team ensures that governance meets institutional investors’ expectations: independent directors with relevant qualifications, clear fiduciary duties, a meeting calendar, minutes and a conflicts of interest policy.

Regarding product restrictions the VCC as a form is flexible. Restrictions more often follow from investor status and the manager’s licence. In the institutional/accredited segment Singapore does not set strict limits on derivatives and leverage, but requires an adequate risk management framework, disclosures and controls. COREDO’s experience confirms: MAS’s inspection focus is on the actual implementation of policies, not just their formal existence.

Taxes for VCC: 13R/13X and residency

VCC tax benefits are based on the regimes Section 13R and Section 13X. The 13R regime is intended for onshore‑funds with certain requirements for AUM and investor profile; 13X is a more “institutional” incentive without investor restrictions, but with minimal economic criteria. In COREDO cases we achieve optimization by obtaining a tax residency certificate for the VCC, access to the DTA network and proper management of withholding tax implications for funds.

Economic substance requirements for VCC — a point of focus in 2026. A management function in Singapore is required: board meetings in Singapore, a local director, on‑the‑ground contracts with administrators and auditors, as well as a reasonable “critical mass” of operations and decision‑making. The issue of substance and employees vs service outsourcing is addressed by a combination of the manager’s core‑personnel and outsourcing non‑core functions. We take into account BEPS 2.0 / Pillar Two implications for funds: hedge funds are often subject to carve‑outs, but this requires a review of the group structure and investor layers.

GST treatment for investment funds in Singapore is usually neutral at the investment level, but contractual relationships with suppliers are important. Transfer pricing considerations for fund groups are relevant for cross‑border services of the manager and the related administrator, and I recommend establishing a TP policy from day one. This reduces the risk of queries when obtaining tax residency and during subsequent audits.

Timeline and stages for launching a VCC

The VCC registration timeline and launch stages depend on the readiness of the manager and investor documentation. In a standard COREDO project we complete this in 6–10 weeks from decision to first subscription:

• Weeks 1–2: VCC architecture and fund structure 2026, selection of RFMC/CMS, appointment of directors, start of KYC on beneficiaries, preparation of constitutional documents.
• Weeks 2–4: filing with the RFMC or CMS (if required), arranging corporate services, preparation of the offering memorandum, subscription agreement, NAV policy and valuation, draft AML/CFT framework.
• Weeks 4–6: opening bank and brokerage accounts, selection of administrator and custodian, setup of transfer agency and investor servicing, finalizing derivative ISDA/GMRA/prime brokerage arrangements.
• Weeks 6–10: testing reconciliations and fund accounting, launching CRS/FATCA processes, data protection policy and cross-border data flows, final board approvals and first subscription.

Operational blocks: AML/KYC and reporting

Operational reliability: a critical factor for VCC Singapore hedge funds. In COREDO projects I focus the team on the following modules:

• Administration and accounting: an independent third‑party administrator, clear NAV policies, independent valuation and NAV procedures for illiquid/OTC. Reconciliation and fund accounting best practices, daily reconciliation with prime brokers, the custodian and the bank.
• Prime brokerage and leverage: documenting prime brokerage and leverage arrangements, margin terms, haircuts, stress tests, derivatives clearing and collateral management. We include insurance and operational risk transfer where economically justified.
• Transfer agency and investor relations: transparent subscription and redemption mechanics, processing side letters, control of gate provisions and side pockets. Maintaining the beneficial ownership register of the VCC and notice requirements for investors.
• Compliance: AML/CFT controls for fund subscriptions, KYC and PEP screening procedures, transaction monitoring and sanctions screening. Integration with FATF recommendations for fund administrators and CRS/FATCA reporting obligations.
• Internal controls: risk management framework for hedge funds, internal controls and compliance monitoring, internal audit and external audit requirements. We include cybersecurity: cybersecurity controls for fund managers and a policy on data protection and cross‑border data flows.

Master-feeder: marketing in the EU and Asia

A VCC’s compatibility with a master‑feeder structure is a proven solution for geographic marketing. Often the VCC acts as the master, and the European feeder is managed by an AIFM under the applicable AIFMD. Alternatively, a feeder‑VCC with a master in another jurisdiction is possible, but for institutional investors a Singapore master is convenient from a reporting and DTA perspective.

Marketing funds to EU and Asian investors requires compliance with local rules. In the EU – NPPR under AIFMD, operating through a licensed AIFM and controlled distribution channels. In Asia, a country‑by‑country approach: onshore vs offshore domicile decision factors and passporting alternatives. The COREDO team configures distribution channels so as not to cross the line «offering to the retail public», if the strategy is strictly professional.

Cayman vs VCC: which wins when

The VCC vs Cayman question comes up in about every other hedge fund project. Cayman historically dominated as an offshore SPV, but the trend is shifting toward regulated onshore structures. VCC has tax advantages with 13R/13X, a network of DTA, a clear MAS regime and economic substance — arguments in favor of Singapore. On the other hand, Cayman can remain attractive for certain strategies, especially when there is an established pool of investors.

Cayman Islands vs VCC cost comparison in 2026 shows: setup for VCC is comparable or higher, but recurring compliance costs for VCC are often more predictable, and ROI improves due to tax efficiency, access to Asian investors and reduced frictions with banks and custodians. Operational due diligence for prime brokers also proceeds faster when the structure is onshore and regulated.

How to change your domicile without incurring losses

Redomiciliation of funds to Singapore is becoming in demand in 2026. Liquidation and re-domiciliation of VCC can proceed under two scenarios: transferring the existing fund while preserving its history, or closing the old one and launching a new VCC with the transfer of assets. In both cases, notice requirements and investor disclosures, assessment of tax consequences, and coordination with counterparties (prime brokers, custodians, administrator) are important.

Frequently asked questions from managers and investors

If the fund has institutional plans in Asia, a need for DTA and you are aiming for onshore residency, conversion makes sense. Weigh the cost of redomiciliation, tax savings and investor perception. Our experience suggests: a positive NPV most often appears on a 2–3 year horizon.

ROI benefits from tax incentives 13R/13X and reduced frictions with service providers. Operating expenses become more transparent: administration, audit, compliance, governance. In terms of OPEX/ AUM dynamics, especially after reaching critical mass, a VCC demonstrates competitive economics.

Key ones are economic substance in Singapore, the correct license (CMS or RFMC), continuous AML/CFT and sanctions control, as well as data protection for cross‑border data flows. The solution: allocate functions so that the “reasonable management center” is in Singapore, and outsourcing does not replace core‑decision making.

VCC as master, EU feeder under an AIFM with NPPR, a workable scheme. It’s important to synchronize NAV cut‑off, disclosures, KIDs/ PRIIPs (if relevant), as well as TP policy and cross‑border fee flows. The COREDO team designs documentation to meet both MAS and AIFMD expectations.

Documented NAV policies are required, independent valuations for illiquid/OTC, liquidity stress tests, counterparty and leverage limits, as well as regular reporting to the board’s risk committee. For derivatives: procedures for collateral management, variation/ initial margin and fair value models.

A VCC registers as a Reporting FI, the administrator conducts KYC/AML, PEP screening, CRS/FATCA reporting, and sanctions screening is performed at subscription and on an ongoing basis. COREDO solutions use automated lists and triggers for transaction monitoring.

In the institutional/ accredited segment, there are no retail‑style restrictions, but there are requirements for risk management, liquidity and disclosures. Brokers and custodians also impose their own limits, which effectively become the risk cap.

An independent director is highly desirable: it strengthens governance and passes investor ODD. A depositary is mandatory for retail funds; for professional funds, a custodian is required, and depositary functions can be handled through custody agreements and the administrator.

COREDO Case Studies: How We Solved the Challenges

Case 1: launches of two sub‑funds under a VCC for quant strategies.
Client: a European manager, targets – Asian LPs and prime brokerage in Singapore. COREDO developed a VCC sub‑fund segregated portfolio with market neutral and stat‑arb strategies, 13X, RFMC, an independent administrator and custodian. Result – launched in 9 weeks, successful ODD at two prime brokers, a positive track record and an expansion plan.

Case 2: redomiciliation from Cayman to a VCC while retaining investors.
Objective: reduce withholding on dividends and coupons through a DTA and enhance operational transparency. The COREDO team performed the redomiciliation, retransferred ISDA/GMRA, synchronized notice requirements and conducted a tax assessment. Within a year the client obtained a tax residency certificate and reduced the portfolio’s overall WHT.

Case 3: strengthening AML/CFT and sanctions screening at an existing VCC.
After a request from the bank the client approached us. The solution developed by COREDO included configuring KYC/PEP screening, ongoing transaction monitoring, updating policies in line with FATF and MAS guidance, implementing an incident‑management system and staff training. The bank confirmed compliance, and operational delays ceased.

Cost of a VCC in Singapore in 2026

Cost model: setup vs recurring compliance costs: the key to managing the fund’s P&L. Typically, initial costs include incorporation of the VCC, the manager’s licensing trajectory (CMS/RFMC), preparation of the Offering Memorandum and agreements, onboarding of the administrator and custodian, as well as legal and tax opinions. Recurring – administration and NAV calculation, audit, tax reporting, compliance-monitoring, corporate secretarial services and the board.

Project plan with COREDO for the initial subscription

• Diagnostics and target model: choose VCC vs alternatives, determine CMS or RFMC, assess the 13R/13X tax regime and economic substance requirements.
• Fund architecture: umbrella vs single‑fund, share classes, liquidity management, side pockets, gate provisions, NAV policy and valuation.
• Providers: third‑party administrator selection criteria, custodian and fund administration requirements, auditor selection, cybersecurity and data protection.
• Documents: offering memorandum, subscription agreement, AML/CFT policy, sanctions screening, CRS/FATCA, VCC beneficial ownership register.
• Integration with brokers and banks: prime brokerage, derivatives clearing, collateral management, reconciliation and accounting.
• Marketing and compliance: AIFMD/NPPR for the EU, Asian channels, notice requirements and investor disclosures, ESG integration (on LPs’ request).
• Launch and monitoring: test‑set, first subscription, board reports, internal audits, readiness for MAS inspections and enforcement trends.

VCC — a long-term vehicle

Variable Capital Company Singapore – this is not just a legal wrapper, but an institutional-grade platform for hedge funds ready to play the long game. The liquidity and variable capitalization of the VCC, sub‑fund segregation, tax incentives 13R/13X, compatibility with master‑feeder structures and the strict but predictable oversight of the MAS create the foundation for sustainable growth. Yes, there are requirements for economic substance, governance and compliance. But that is exactly what investors and counterparties like — and what adds value to your brand.

If you are wondering how to register a VCC for a hedge fund in Singapore, which licensing regime to choose, how to ensure economic substance for the VCC’s tax efficiency and how to build an operational model without “bottlenecks”, I am ready to discuss your case in detail. COREDO’s experience in the EU, the UK, Singapore and Dubai helps connect the tax, regulatory and operational dimensions into a single strategy. In the outcomes, discipline, transparency and speed matter — and those are precisely what we rely on every day.