How to Set Up a Hedge Fund in Singapore
The setup path for an open-ended hedge fund — the VCC structure, the CMS licence, accredited-investor minimums, and the Section 13U tax exemption — in the 2026 rules.
To set up a hedge fund in Singapore, you incorporate an open-ended fund vehicle — typically a Variable Capital Company (VCC) — appoint a MAS-licensed fund manager holding a Capital Markets Services (CMS) licence (or launch under an existing one), restrict the offer to accredited and institutional investors, apply for the Section 13U tax exemption, and appoint the service providers. A hedge fund is an open-ended pooled vehicle: investors subscribe and redeem regularly at net asset value (NAV), and the manager runs an active, often liquid, strategy for performance fees.
Singapore has become Asia's leading centre for liquid alternatives, and the VCC was designed with open-ended funds squarely in mind. This guide walks through the setup in order. For the strategy-specific structuring detail, see our hedge fund page.
Step 1: Use an open-ended vehicle — why the VCC fits
The defining feature of a hedge fund is that it is open-ended: capital flows in and out as investors subscribe and redeem, and the fund is valued at NAV so those movements happen at fair value. This is a different shape from the closed-end private equity and venture capital funds with their fixed commitments and drawdowns. The VCC was built for the open-ended case:
- Free issue and redemption of shares at NAV. A VCC can issue and redeem its own shares without the capital-maintenance constraints of an ordinary company — exactly what open-ended subscriptions and redemptions require.
- Dividends and redemptions out of capital. A VCC can pay out of capital, not only out of accounting profit, giving the flexibility a trading fund needs.
- Variable capital that tracks NAV. The VCC's share capital moves with subscriptions and redemptions, so its capital always equals its net assets.
- Multiple strategies as ring-fenced sub-funds. A multi-strategy manager can hold each strategy or share class as a statutorily segregated sub-fund under one umbrella, sharing a single manager, administrator and auditor.
Step 2: Sort the manager and the CMS licence
A hedge fund manager runs liquid, often complex strategies, so — unlike a VC fund — it cannot use the light-touch VCFM route. It needs a full CMS licence for fund management, making it a Licensed Fund Management Company (LFMC). Because a hedge fund is offered only to accredited and institutional investors (see Step 3), the relevant tier is usually the Accredited/Institutional (A/I) LFMC:
- S$250k base capital and risk-based capital of at least 120%.
- At least two Singapore-based professionals and fit-and-proper directors and shareholders.
- A compliance function, independent audit and professional indemnity insurance.
- A MAS review of roughly six months from a complete Form 1 application.
As with any fund, the licence is held by the manager, not the fund — so a first-time manager can launch under an existing licensed Permissible Fund Manager rather than getting its own CMS licence, reaching the market in weeks and skipping the S$250k lock-up and the six-month wait. The full trade-off is on running a VCC without your own licence. Many hedge fund managers launch under a manager, build a track record, then licence up.
Step 3: Restrict the offer to accredited and institutional investors
Hedge funds in Singapore are, in practice, not retail products. The fund is offered only to accredited investors and institutional investors, which keeps the manager on the lighter A/I licence and the fund within the private-placement exemptions rather than the heavier retail-collective-investment-scheme regime. Accredited investors are individuals and entities meeting MAS wealth and income thresholds (broadly, high-net-worth individuals and substantial corporate investors). On top of the accreditation requirement, hedge funds typically set a high minimum subscription — so the investor base is sophisticated by both regulation and economics. This investor restriction is what lets a hedge fund avoid retail-grade disclosure and capital requirements; opening to retail money would push the manager toward a Retail LFMC (S$500k base capital, S$1m for a retail CIS) and a far heavier compliance load.
Step 4: Apply for the Section 13U tax exemption
A hedge fund managed by a MAS-licensed manager applies for one of the MAS-administered incentives to exempt its qualifying income from Singapore tax:
- Section 13U (Enhanced Tier) — the usual home for a hedge fund. It exempts qualifying income on designated investments, requires S$50M in designated investments, at least three investment professionals (one non-family), and tiered local spending. A multi-strategy umbrella can sit under one 13U award, with sub-fund AUM aggregating toward the S$50M threshold.
- Section 13O — for a smaller or launching fund below S$50M: a S$5M floor and two investment professionals.
A key point for liquid strategies: the exemption applies to qualifying income from designated investments, so confirm that the fund's instruments — equities, bonds, derivatives and so on — fall within the designated-investment list, since the schemes are defined by reference to it. The local business spending requirement is tiered:
| Fund AUM | Minimum local business spending (per year) |
|---|---|
| Below S$250M | S$200,000 |
| S$250M – S$2B | S$300,000 |
| Above S$2B | S$500,000 |
The full set of schemes and the 2025 changes are on the Singapore fund tax incentives hub.
Step 5: Appoint the service providers and incorporate
A hedge fund carries a fuller provider stack than a closed-end fund because it is valued and traded continuously. Expect to appoint:
- A fund administrator to strike the NAV and process subscriptions and redemptions.
- A prime broker and/or custodian to hold assets, provide financing and clear trades.
- A Singapore-based auditor — a VCC has no audit exemption; an annual audit is required.
- Fund counsel for the offering documents and the private-placement terms, and a tax adviser for the 13U application.
The VCC is then incorporated through ACRA via its service providers and the manager and providers appointed. The provider and incorporation detail is on VCC service providers & ACRA incorporation; the overall sequence on how to start a fund in Singapore.
How are hedge fund fees and economics structured?
A hedge fund's economics differ from the carry-and-hurdle model of private equity. The manager typically earns two streams, both written into the fund's share-class terms:
- A management fee — an annual percentage of net asset value, charged regardless of performance, that funds the manager's operating costs. It is taxable trading income at the management-company level.
- A performance fee — a percentage of the fund's gains, the manager's incentive. Because a hedge fund is marked to NAV continuously, the performance fee is usually subject to a high-water mark so it is only charged on net new gains above the highest prior NAV, and sometimes a hurdle rate as well.
In a VCC these economics are implemented through separate share classes — a management share class and the investor classes — with the fee mechanics defined in the constitution. Singapore's lack of a capital-gains tax means gains realised within the fund are not taxed at the fund level once the incentive is in place; the manager's fees are taxed as the management company's income. As with any fund, confirm the tax treatment of performance fees and any team incentives with a Singapore tax adviser.
Hedge fund VCC vs an offshore (Cayman) hedge fund
The traditional Asian hedge fund structure is a Cayman open-ended company with a Singapore-based manager. The VCC offers an onshore corporate alternative that keeps fund and manager in the same jurisdiction:
| Factor | Singapore VCC | Cayman open-ended company |
|---|---|---|
| Domicile | Onshore Singapore — fund and manager together | Offshore; manager usually onshore in SG |
| Open-ended mechanics | Native — issue/redeem at NAV, pay out of capital | Native — the established open-ended form |
| Tax on fund income | Exempt under 13U/13O with substance; no CGT | No local tax; no incentive needed (no treaty access) |
| Treaty / DTA access | Yes — 90+ treaties reduce withholding on Asian income | None |
| Multi-strategy | Ring-fenced sub-funds under one umbrella | Segregated portfolio company per strategy |
| Substance / investor view | Real onshore substance; growing acceptance | Familiar globally; offshore label invites diligence |
| Audit | Mandatory (no exemption) | Annual audit also expected |
For a manager whose investors and trading desk are already in Singapore and whose strategy touches treaty-partner markets, the VCC removes the offshore layer and brings treaty access. A manager with a predominantly US or global investor base accustomed to Cayman may keep the offshore vehicle, or run a VCC alongside it. The broader offshore comparison is on VCC vs Cayman.
Hedge fund setup at a glance
| Element | Typical hedge fund position |
|---|---|
| Fund vehicle | Open-ended VCC (standalone or umbrella) |
| Liquidity | Open-ended — subscribe/redeem at NAV |
| Manager licence | A/I CMS licence (LFMC) — or launch under an existing manager |
| Investors | Accredited & institutional only; high minimum subscription |
| Tax incentive | Section 13U (or 13O below S$50M) |
| Key providers | Administrator, prime broker/custodian, auditor, counsel |
| Audit | Mandatory — no VCC audit exemption |
Launching a hedge fund in Singapore?
We partner with MAS-licensed CMS fund managers. Tell us your strategy and investor base, and we'll map the fastest route to a live, open-ended VCC.
Speak to a specialist →Frequently asked questions
How do you set up a hedge fund in Singapore?
You incorporate an open-ended fund vehicle (typically a VCC), appoint a MAS-licensed fund manager holding a Capital Markets Services licence (or launch under an existing one), restrict the offer to accredited and institutional investors, apply for the Section 13U tax exemption, and appoint the service providers — administrator, auditor, prime broker and custodian.
Why is a VCC well suited to a hedge fund?
A hedge fund is open-ended — investors subscribe and redeem regularly at net asset value. A VCC is built for exactly that: it can issue and redeem shares freely at NAV, pay dividends out of capital, and hold multiple strategies as ring-fenced sub-funds under one umbrella, sharing a single manager, administrator and auditor.
Do hedge fund investors in Singapore have to be accredited?
In practice yes. A hedge fund is generally offered only to accredited and institutional investors, which lets the manager hold the lighter Accredited/Institutional CMS licence rather than a retail licence. Accredited investors are individuals and entities meeting MAS wealth and income thresholds; the fund itself usually sets a high minimum subscription.
Which tax incentive does a Singapore hedge fund use?
Most hedge funds use Section 13U, the Enhanced Tier: S$50M in designated investments, three investment professionals and tiered local spending. A smaller fund below S$50M can use Section 13O, which needs S$5M and two professionals. Both exempt qualifying income from designated investments from Singapore tax.
VCC Singapore is an independent informational resource and is not a regulator, law firm or tax adviser. Licensing tiers, investor-eligibility rules and tax thresholds are set by MAS and IRAS and change periodically — confirm the current figures with qualified advisers before acting. This page is general information, not legal, tax or financial advice.