Family office, Family Fund and VCC

What is a family fund?

A family fund is an investment vehicle established by a family to hold and manage the investments of family members who have committed to the structure. It may hold bankable assets, such as stocks and bonds, as well as non-portfolio assets like real estate or private equity investments. Often, family funds are structured as a way to segregate assets into different companies, providing liability protection, ease of cash extraction, and a preferred exit strategy for specific investments.

How is family fund related to family office?

To effectively manage a family fund, a family office is typically employed. A family office is an entity that provides a range of services that a family may need, including investment management, financial advisory services, and administrative and concierge services to family members and their investment holding entities. The family office can assist in the establishment and management of the family fund, as well as in the allocation of assets to sub-funds within the VCC.

What is VCC?

A family fund can benefit greatly from using a Variable Capital Company (VCC) as its corporate structure. The VCC is a flexible and cost-effective option that allows for the creation of multiple sub-funds within the same entity, enabling a degree of separation in the management of assets. This feature is especially helpful for families who want to tailor each sub-fund to the specific investment needs of each family member, while retaining a unified structure.

In addition to its flexibility, the VCC is also tax-efficient, making it an attractive option for families who want to manage their assets in a tax-neutral manner. This can help to minimize tax exposure and maximize returns on investments. The VCC also has a low cost of establishment, as it does not require a minimum capital requirement or the appointment of a local director, making it an accessible option for families of varying sizes and resources.

Another benefit of the VCC is its regulatory recognition, which can help to attract a wider range of investors to the family fund. The VCC is a recognized and regulated entity that can be used by both retail and institutional investors to set up investment funds in Singapore. This can potentially help families to diversify their investment base and increase the overall performance of the fund.

As such, VCC is a highly attractive option for families who want to establish a single family fund and retain a degree of separation in the management of assets. Its flexible structure, tax efficiency, low cost of establishment, and regulatory recognition make it an ideal corporate structure for family funds of all sizes and investment needs.

The overall relationship

A family fund provides a way for a family to manage and invest their wealth in a more structured and organized manner. The family office plays a key role in establishing and managing the family fund, and using a VCC as the corporate structure offers several benefits in terms of flexibility, tax efficiency, and cost-effectiveness.