Direct answers, worked examples and the Singapore angle, for fund managers, fund administrators and family offices.
The four terms most useful when setting up and running a Singapore fund.
A Variable Capital Company (VCC) is a Singapore corporate fund structure, available since January 2020, that can hold a single fund or an umbrella of ring-fenced sub-funds. It issues and redeems shares at net asset value without a capital-reduction process, and must be managed by an MAS-regulated fund manager.
Read definition Singapore fund structures & regulationSections 13O and 13U of the Singapore Income Tax Act are tax incentive schemes that exempt qualifying income of a fund managed from Singapore. 13O is the onshore scheme, usually for single family offices from S$20M AUM; 13U is the enhanced tier for larger or multi-vehicle structures from S$50M AUM.
Read definition Fund economicsA distribution waterfall is the order of priority in which a fund's proceeds are paid out. Typically LPs first receive their invested capital back, then a preferred return, then the GP receives a catch-up, and finally profits are split between LPs and the GP, usually 80/20, as carried interest.
Read definition Fund accountingNet asset value (NAV) is the total value of a fund's assets minus its liabilities at a point in time. Dividing NAV by the number of units or shares gives NAV per unit, the price at which investors subscribe or redeem in open-ended funds and the basis for reported value in closed-end funds.
Read definitionVCCs, MAS licensing and tax incentives — how funds are set up and regulated in Singapore.
A Variable Capital Company (VCC) is a Singapore corporate fund structure, available since January 2020, that can hold a single fund or an umbrella of ring-fenced sub-funds. It issues and redeems shares at net asset value without a capital-reduction process, and must be managed by an MAS-regulated fund manager.
Read definition Singapore fund structures & regulationSections 13O and 13U of the Singapore Income Tax Act are tax incentive schemes that exempt qualifying income of a fund managed from Singapore. 13O is the onshore scheme, usually for single family offices from S$20M AUM; 13U is the enhanced tier for larger or multi-vehicle structures from S$50M AUM.
Read definitionWaterfalls, carried interest, fees and returns — how money moves between LPs and the GP.
A distribution waterfall is the order of priority in which a fund's proceeds are paid out. Typically LPs first receive their invested capital back, then a preferred return, then the GP receives a catch-up, and finally profits are split between LPs and the GP, usually 80/20, as carried interest.
Read definition Fund economicsCarried interest, or carry, is the share of a fund's profits paid to the general partner as performance compensation, typically 20%. It is earned only after limited partners have received their capital back and, in most funds, a preferred return, and it is paid through the fund's distribution waterfall.
Read definition Fund economicsA management fee is the annual fee a fund pays its manager to cover operating costs, regardless of performance. In private equity and venture capital it is commonly around 2% a year, charged on committed capital during the investment period and on invested capital afterwards, and it is funded through capital calls.
Read definitionNAV, fair value and IFRS 9 / SFRS(I) 9 — how fund books are kept and valued.
Net asset value (NAV) is the total value of a fund's assets minus its liabilities at a point in time. Dividing NAV by the number of units or shares gives NAV per unit, the price at which investors subscribe or redeem in open-ended funds and the basis for reported value in closed-end funds.
Read definition Fund accountingThe fair value hierarchy, set out in IFRS 13, ranks the inputs used to value an asset by reliability. Level 1 uses quoted prices in active markets, Level 2 uses other observable inputs, and Level 3 uses unobservable inputs and management judgement. Funds disclose how much of their portfolio sits in each level.
Read definition Fund accountingIFRS 9, called SFRS(I) 9 in Singapore, is the accounting standard for financial instruments. It classifies each instrument by the entity's business model and whether cash flows are solely payments of principal and interest (SPPI), then measures it at amortised cost, fair value through OCI, or fair value through profit or loss, with expected credit loss for impairment.
Read definitionTVPI, DPI, RVPI and the metrics limited partners use to judge a fund.
DPI, RVPI and TVPI are fund performance multiples measured against paid-in capital. DPI is distributions divided by paid-in capital, the cash actually returned. RVPI is remaining net asset value divided by paid-in capital, the value still held. TVPI is DPI plus RVPI, the total value created so far.
Read definition LP reporting & performanceMOIC, the multiple on invested capital, is total value divided by capital invested, showing how many times money was returned. IRR, the internal rate of return, is the annualised return that accounts for when cash flows occurred. Two investments with the same MOIC can have very different IRRs if one took longer.
Read definitionCapital calls, distributions, investor servicing and the day-to-day mechanics of running a fund.
A capital call, also called a drawdown, is a formal request from a fund manager for limited partners to pay in part of the capital they committed. Funds call capital as needed for investments, fees and expenses, rather than collecting the full commitment upfront, and each LP pays pro rata to its commitment.
Read definition Fund operationsA fund administrator is the firm, or in-house team, that runs a fund's back office: calculating NAV, keeping the books, processing capital calls and distributions, maintaining investor records and producing reports. It is distinct from the fund manager, which makes the investment decisions.
Read definition Fund operationsA side letter is a separate agreement between a fund and an individual limited partner that grants that investor rights or terms beyond the limited partnership agreement, such as fee discounts, co-investment rights, extra reporting or excuse rights. Most LPs of meaningful size also negotiate a most-favoured-nation (MFN) clause.
Read definitionEvery term in one list.
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