Turning potential into reality
The ASEAN region has demonstrated itself as a major area for investment and potential growth. However, much of this growth is still on the horizon and yet to be materialised. For the prospects of the ASEAN region to reach their true potential, the current environment requires cost efficiency, scalability and talent. These are critical factors to creating a supportive ecosystem.
One of the most promising examples of this opportunity was the launch of the Variable Capital Company (VCC) by the Monetary Authority of Singapore (MAS).
“It’s an understatement to say that the region has a lot of growth potential. It has the people, the money and the desire for growth. But in reality, that really hasn’t materialised over the years. Looking at it through the lens of capital markets services, a lot of that has to do with the fact that the region hasn’t seen the innovation necessary to penetrate a fragmented market and navigate through the differences each of the countries have.
“It’s not a single Europe model, which makes it very challenging and costly to do business. When the cost is high, then scale is a problem. But in the last few years, we are seeing some of those differences diminish, as technology and innovation seems to be cutting across regional divisions.
“In a fragmented landscape, the most efficient platform provider will win. The region comes from a lower base; hence, it has the most upside. So, taking all of those factors together it’s a fabulously interesting time for ASEAN,” says Aditya Laroia (pictured), global head of prime brokerage and country head of investment management in Singapore for Maybank Kim Eng Securities.
Laroia joined the Singapore office of Maybank Kim Eng Securities in May 2020, to take up a pivotal role in the bank’s next phase of growth, driving both the Prime Brokerage and Investment Management business.
When discussing the future of Singapore’s financial services industry, Laroia believes it is still the most important gateway between east and the west. It has regularly been singled out as one of the most stable regions to operate in, with a business-friendly regulatory set-up. Now you can also add innovative to the list of differentiations, he says. With the launch of the VCC Act, Singapore has announced to the world that it aims to be the single most relevant region for wealth and asset management businesses.
In Laroia’s words “The VCC launch has added another arrow in the quiver to attract not just fund managers, but also rest of the industry service providers to Singapore, making Singapore a one-stop shop for both fund management and fund domiciliation.”
Overall, there has been a trend in the onshoring of investment structures, as off-shore jurisdictions can be perceived negatively. Events, such as the black-listing of the Cayman Islands by the EU earlier this year, have not helped in this regard. “We have had anecdotal feedback, from our clients, that one of their institutional investors would rather use an onshore structure like VCC where possible,” Laroia explained.
The consensus within the asset management industry for the VCC has been very positive. It has provided Singapore, already a global investment hub, with an investment vehicle structure in-line with traditional domiciles like Cayman Islands, Bermuda and Mauritius. The VCC brings a range of tax, flexibility and privacy benefits to the asset manager and their clients. The speed and cost savings to launch sub-funds has been very noticeable.
In addition, the flexibility of the VCC structure means it can be applied across a wide range of manager and investment types, offering an even wider ecosystem of manager types in Singapore. The way the structure has been created means it can accommodate various types of underlying investments, thus increasing its appeal. “The VCC is a coming of age for the Singapore investment industry, bringing a globally competitive investment vehicle to our shores. Whatever end of the investment spectrum you sit, the VCC can directly benefit your future”
VCCs and future role of a Prime Broker
Statistics from the Accounting and Corporate Regulatory Authority (ACRA) show there have been over 100 VCC registrations in the last seven months. Laroia remarks: “This is quite a dramatic pick up and these set-ups are not all hedge funds or private equity funds; some are wealth managers or family offices. In this context, our offering becomes a meaningful differentiator. Maybank is probably one of the largest and broadest platforms available in ASEAN, offering a full range of financial services, from commercial banking to prime brokerage and everything else in between. The managers setting up VCCs will need the whole suite of services that we provide and we can easily manoeuvre between the different platform solutions depending on what the clients are looking for.
“Prime, in its construct, is one of the true multi asset and multi geography businesses. The idea of a prime offering is to be able to help a client trade any macro opportunity around the world. Most tier 1 primes only focus on the hedge fund community, but for us it is a much more comprehensive business strategy looking across client segments.
“Given the broad range of organisations that are leveraging on the VCC set-up, it opens up the opportunity to sell across a number of asset management and wealth management businesses, including those that are looking to come to Asia from Europe and the US. The framework of how we support and service a family office may differ versus a hedge fund, but the underlying product they need is relatively similar. With the proliferation of the VCC structures, we see a number of new clients requiring prime type services. These new clients will range from smaller funds and families to larger hedge fund and asset managers, so hence, a platform that can successfully support clients of all sizes will becomes very vital. For us, the focus is on integrating one of the largest ASEAN investment banking platforms into the Singapore and the global fund management framework.
“As a Prime working with managers that are working with nervous investors in the wake of market volatility and economic uncertainty caused by the Covid-19 pandemic, we’ve been happy to help support them in securing their mandates, as their investors have the reassurance that their assets are being held with one of the region’s strongest banks.
“Our aim is to provide a complete service through one relationship, so clients can utilise their commission dollars more efficiently and pay us across a number of products and services. In an environment where fees are potentially going through a structural change, Prime helps create a foundation for the firm to be able to offer value added services to clients and be the channel that connects investors and fund managers across the region.”
Head of Prime Brokerage, Global, Head of Investment Management, Singapore, Maybank Kim Eng
Aditya Laroia joined Maybank Kim Eng in 2020 as Global Head of Prime Brokerage and Country Head of Investment Management. Aditya brings a wealth of experience to the Bank having been Head of Sales Asia-Pacific at Saxo Markets where he was responsible for managing all sales and commercial activities for Saxo Group in the region. Prior to this, he was with Nomura as Head of Wholesale Electronic Trading and Financing where he was responsible for intermediary and wholesale sales in electronic execution and programme trading. Aditya’s career begun at Lehman Brothers, where he spent ten years working in asset-backed securities and principal finance, as well as in liquid markets origination.