Depending on each family’s requirements, the family office fund structure could range from simple investment holding structures to complex arrangements involving multiple trusts, sub-trusts for individual beneficiaries, private trust companies, multiple funds, and complex asset classes, among others. In this paper, we will discuss two common structures, the Single Family Office (SFO) and Multi-family Office (MFO).
There are estimated to be more than 700 Single Family Offices in Singapore and the number has grown in recent years. MAS did not have hard data on the scale of their operations because Single Family Offices in Singapore do not manage third-party monies and are therefore not registered with or licensed by MAS. However, industry research estimates that each Single Family Office typically manages assets of more than US$100 million, so total assets under management by Single Family Offices could be around US$20 billion.
Generally, the term “single family office” refers to an entity that manages assets for or on behalf of a family, and which is also wholly owned or controlled by the members of that same family.
The typical Single Family Office structure includes an onshore or offshore Fund entity, which is managed by a Singapore-incorporated SFO company. The Single Family Office in Singapore company will provide investment management services to the Fund. It can also provide concierge and administrative services to the family.
Since the Single Family Office company is responsible for managing funds on behalf of a single family and not external parties, it can potentially qualify for CMS (Capital Markets Services) licensing exemption under the rules of the Monetary Authority of Singapore (MAS). In the structure diagram shown below, where the SFO company is held directly by the Fund entity, such exemption is applicable.
The choice of Fund entity is wide-ranging, and families can choose between onshore (Singapore) and offshore vehicles. Commonly used vehicles in Singapore include a private limited company, a limited partnership and the VCC (or Variable Capital Company), which we will discuss more in the next section.
Some families may incorporate trust structures on their family office platform. The use of trust provides several advantages and can be structured in such a way that it is not considered to be owned by a high-net-worth individual and does not form part of the estate of the individual when he or she passes away. Hence, the primary purposes for setting up a trust include succession and estate planning, the asset protection against creditors in the event of a marital breakdown, wealth planning, maintaining the confidentiality of asset information, ensuring continuity of the family business, and tax minimisation. In addition, a trust facilitates the process of transferring an estate after the settlor passes away whilst avoiding lengthy and potentially costly probate.
Trusts in Singapore are generally administered by either an institutional trustee or a private trust company.
The Multi-Families Office (VCC) structure was introduced to increase the international competitiveness of the fund industry in Singapore by encouraging funds to incorporate and operate in the country through a more flexible corporate structure. The VCC Act came into effect on 14 January 2020.
The VCC has the characteristics of a Singapore company because it is a separate legal person, but unlike a typical company, the VCC offers greater privacy as its financial statements are not required to be made public. The VCC also provides flexibility in the issuance and redemption of share capital. The VCC can use its capital/net assets to redeem shares and distribute dividends out of capital.
The unique characteristics of the Singapore Multi-Families Office (VCC) structure offer multiple advantages to the multi-families office (MFO). The VCC can be established as an umbrella structure with multiple sub-funds and share classes. The umbrella VCC would have provisions for the segregation of assets and liabilities between sub-funds, such that the assets of one sub-fund may not be used to satisfy the liabilities of another sub-fund.
Sub-funds may have different investment mandates and assigned beneficiaries. Such structure allows greater flexibility in segregating and allocating assets, differentiating investment objectives, and interest distribution arrangements between multiple families.
However, a licensed Singapore fund manager, such as Rockstead Capital, is required to manage the VCC. This means that single family offices are currently not able to access the advantages offered by a VCC structure.
Our team of experienced portfolio managers, analysts, and operational, compliance and legal specialists at Rockstead Capital is well positioned to help you navigate the complexity of creating a family office structure that encompasses your vision of the future, investment philosophy, and plan to protect human and intelligence capital.
Generally, our family office clients have the option to set up either a Single Family Office (SFO) or Multiple Family Office (MFO) under the VCC structure. Each option comes with associated benefits and limitations.
Establishing an MFO under the Rockstead Capital VCC umbrella requires no incorporation of a company entity or a Fund. The client only needs to register a VCC sub-fund, which is a straightforward and quick process. Since Rockstead Capital has been awarded the 13U tax exemption, MFO clients can enjoy tax exemption on their investment returns without the need to apply for any tax exemption scheme. These advantages mean that establishing an MFO under the Rockstead Capital VCC requires a significantly shorter timeframe (estimated 45 days). Furthermore, the MFO allows acceptance of investment funds from external investors, which essentially means the family office can, if they choose to, use the setup to operate an asset management business.