Global Perspectives on the Third-Party Fund Management Model – Lessons for GIFT IFSC
The newly approved Third-Party Fund Management Services (TFMS) framework at GIFT IFSC is designed to lower entry barriers for global and domestic managers. While India is just introducing the model, leading fund jurisdictions such as Singapore, Mauritius, and Luxembourg have successfully implemented similar frameworks for years.
By examining these global hubs — their fund vehicles, adoption statistics, and regulatory safeguards — India can refine its own model and position GIFT IFSC as a serious global alternative.
The Singapore Model – Variable Capital Companies and Platform Efficiency
Singapore’s introduction of the Variable Capital Company (VCC) in 2020 transformed its fund industry.
- Adoption Data: As of March 2025, 1,900+ VCCs have been incorporated, with assets under management (AUM) exceeding USD 260 billion, according to MAS reports.
- How It Works: External managers can partner with a licensed Fund Management Company (FMC), which handles compliance, governance, AML/CFT, and reporting.
- Why It Attracts Managers:
- Flexible vehicles (standalone or umbrella).
- Operational efficiency with separation of investment vs compliance.
- Strong investor protection through MAS oversight.
Lesson for India: Flexibility of fund structures, like umbrella schemes, should be introduced within TFMS in GIFT IFSC to scale adoption.
The Mauritius Model – Tax Gateway and Platform Access
Mauritius has long been a preferred gateway for India- and Africa-focused investments.
- Fund Flow Data: Mauritius hosts USD 80+ billion in cross-border investments annually, with India being a key beneficiary. Over 900 global funds are domiciled in Mauritius, many using third-party management platforms.
- Key Features:
- Licensed local operators provide ready-made platforms for external fund managers.
- Treaty-driven tax efficiency, combined with regulatory light-touch, boosts competitiveness.
- Low entry costs attract emerging managers.
Lesson for India: While India cannot replicate treaty arbitrage, clarity and cost-efficiency in TFMS setup can make GIFT IFSC a preferred hub for emerging managers and family offices.
The Luxembourg Model – Delegation and Scale
Luxembourg dominates Europe’s fund management industry.
- Industry Data: As of December 2024, Luxembourg’s fund industry managed over EUR 5.6 trillion in AUM, making it the world’s second-largest fund centre after the U.S.
- Delegation Framework:
- Allows delegation of portfolio management to qualified external managers.
- Diverse fund vehicles: SICAVs, SIFs, RAIFs.
- Investor protection via CSSF supervision, disclosure norms, and liability rules.
Lesson for India: Clear eligibility criteria for External Fund Managers under TFMS is essential to avoid reputational and compliance risks for Registered FMEs.
Comparative Snapshot – TFMS Across Jurisdictions
| Feature | Singapore (VCC Model) | Mauritius | Luxembourg | India – GIFT IFSC (TFMS) |
|---|---|---|---|---|
| Fund Vehicles | VCCs, umbrella funds | GBCs, Collective Schemes | SICAV, SIF, RAIF | Restricted Schemes (non-retail) |
| Scale (AUM / Funds) | USD 260B+ AUM, 1,900 VCCs | USD 80B+ flows, 900+ funds | EUR 5.6T AUM | USD 50M cap per fund |
| Entry for External Managers | Via licensed FMCs | Via licensed platform operators | Delegation to qualified managers | Via Registered FME (with IFSCA approval) |
| Investor Protection | MAS oversight, AML/CFT | Substance norms, AML rules | CSSF supervision, strict liability | Principal Officer, compliance, governance |
| Unique Safeguard | Flexible vehicles | Tax treaty access | Delegation with liability clarity | Extra USD 500k net worth, fund size cap |
India’s TFMS – A Hybrid Approach
The IFSCA framework borrows global elements but adapts them to India’s regulatory context:
- Fund Corpus Cap: USD 50 million per scheme.
- Additional Net Worth: USD 500,000 for FMEs acting as platforms.
- Principal Officer: Dedicated oversight at fund level.
- Platform Restriction: Only Registered FMEs with explicit authorisation can host TFMS funds.
This approach offers prudence but risks limiting commercial attractiveness compared to peers.
Opportunities and Risks for GIFT IFSC
Opportunities:
- Plug-and-play entry for foreign GPs and emerging managers.
- New revenue models for Registered FMEs as hosting platforms.
- Ability to compete with Mauritius for India-bound capital.
- Positioning as a regional hub for Asia-Pacific funds.
Risks:
- The USD 50 million cap may deter institutional players.
- FMEs bear full regulatory and reputational liability for hosted funds.
- Need for commercial flexibility in fee-sharing and delegation terms.
- Ambiguity in “skin in the game” rules may affect viability.
Conclusion – Learning Globally, Leading Locally
The TFMS Model has proven successful worldwide:
- Singapore demonstrates flexibility and efficiency.
- Mauritius offers ease of entry and tax-driven flows.
- Luxembourg provides regulatory depth and robust delegation.
By combining these lessons with India’s own safeguards, GIFT IFSC can emerge as a credible alternative fund-hosting jurisdiction. To succeed, IFSCA must ensure the final framework balances regulatory prudence with commercial scalability.
This article is Part 2 of our series on TFMS in GIFT IFSC.
Read Part 1: Breaking the Substance Barrier – IFSCA Introduces TFMS in GIFT IFSC
(explains the regulatory update and India’s first step toward platform-based fund management).
