Tenacity in the face of adversity
The outlook for the penetration of the Variable Capital Company legislation as a fund structure is upbeat as it soldiers on against the unfortunate timing of its launch, amid a global pandemic. More importantly, in practice the legislation works well and the fund launches have been successful.
“The timing of the VCC launch has been far from perfect. Nobody could have predicted this. But despite this, there are a little over 100 VCCs which have been launched,” comments Gerben Oldekamp, Managing Director and Global Head of Business Development at Circle Partners.
One of the key requirements of the VCC is the fund manager having a physical presence in Singapore. Given the travel restrictions emanating from the Covid-19 pandemic, attracting managers to the jurisdiction is a challenge.
Oldekamp observes: “There is no possibility to travel and it’s very hard to move (staff) here. Although it’s far from ideal to get started in this environment, there are ways to work around the restrictions. There are platforms which play a role in providing the manager set up. Therefore, I would advise managers who are unable to do this themselves to get in touch with such players.”
Had the Coronavirus pandemic not hit the world, Oldekamp believes the VCC would have become an even bigger success. “You do see that the size of the VCCs being launched are not as large as people would have hoped for. It’s a difficult time to raise assets,” he concedes.
An early start
Circle Partners got involved in the VCC early on: “We have been in Singapore for a number of years and we realised the VCC was going to be some serious competition for Cayman. So, early in the process we began to talk to industry influencers and also engaged external parties to help get all of our staff up to speed in terms of our own understanding of the legislation.”
The introduction of the legislation was delayed by a few months while some details were ironed out but according to Oldekamp the wait was worthwhile: “We were lucky enough to get in touch with fund managers active in the pilot phase. We’ve seen first-hand that the end result was worth the wait. Ours were one of the first VCCs launched and we have been happy with the landscape and the way the legislation works in practice. Of course there are always some details and different interpretations that still need to be worked out, but both the MAS and industry leaders have been very helpful in clarifying matters.”
Outlook for Asian growth
According to Oldekamp, the VCC is attracting managers from other Asian countries: “For other Asian countries that don’t have frameworks in place, the VCC offers a good gateway. Further, the country’s stability, the abundance of service providers and supportive regulator makes it quite attractive for managers based in countries like Malaysia, Thailand or even Hong Kong and China, to set up here.”
He says there is less US or European interest than expected as yet, though he is confident this will come to fruition when the global pandemic has abated: “Singapore represents a useful entryway to the East. These structures will definitely attract managers from all over the world. It offers the softest landing in Asia.”
But despite these difficult times, Singapore should keep its doors open to the global industry and players who want to based themselves here. This is critical for the jurisdiction to remain competitive, says Oldekamp.
Investors’ need for performance and their longer-term focus has also been encouraging the launch of more close-ended strategies in Singapore. Oldekamp notes: “We see far more close ended strategies than open ended. A lot more venture capital and private equity funds are being launched rather than traditional hedge funds. This trend is ongoing and will stay for a while.”
He believes performance is a significant driver of this: “Hedge funds haven’t performed as well as they had in the past. I also think people are looking for more long-term opportunities across Asia which these funds can provide.”
In its effort to keep up with the industry progress, Circle Partners has begun using different software,joined various industry associations and has attracted staff externally to ensure its vision is aligned with the players in the industry.
This technology angle has been an unexpected boon in the midst of the pandemic. Oldekamp points out: “There is a lot more automation, online services and remote working. This pandemic has proven to us that in our line of work, it makes no difference whether you’re working from an office or remotely.
“Fund administration is becoming even more technology driven. There are several developments where more duties can be carried out using technology. For example, investment onboarding can be largely done online and calculations can be further automated. This is something we’re continuously working on, especially given that on the whole, our industry has, in regards to certain aspects, been relatively conservative, though things are now changing.”
Oldekamp highlights that although technology benefits clients, first and foremost, it has also had a positive impact on Circle Partners as a firm: “It has also made our work a lot cleaner. We used to have cabinets full of files and documents while now we run a pretty much paperless office. Also, many of our processes have been automated so although we’ve grown heavily over the past couple of years in terms of number of funds under administration our number of staff has not increased equally.”
Managing Director, Global Head of Business Development, Circle Partners