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.