Interview with Charles Kwun – “We started last year working on plans to expand the fund service in Asia,” comments Charles Kwun (pictured), managing director, Vistra Fund Services Asia.
Vistra Fund Services is an independent fund administrator. In May 2012, it launched the Privium Capital Fund structure in Hong Kong; a turnkey solution that works with a variety of service providers to give start-up managers a cost-effective route to market.
Last year Vistra launched a similar solution in Luxembourg using an onshore fund structure with London-based Privium Fund Management acting as investment adviser. This was the prototype that prompted Vistra to exploit what they feel is a niche gap in the Asian market.
“In Luxembourg the product is called Privium Selection Fund. In Asia, where we use a Cayman fund structure, it’s called the Privium Capital Fund.
“We aren’t the first to offer a platform solution here in Hong Kong. Some products might be pure middle-office or back-office solutions, or administration platforms, without packaging all the required service providers together. I’d say Privium is the most comprehensive one-stop shop on the market,” says Kwun.
Vistra handles fund administration with PwC selected for fund auditing and Maples & Calder acting as Cayman legal counsel. Managers - who effectively join the platform as sub-advisers - can also choose to use Privium Fund Management’s middle-office platform. Additionally, the Privium structure adds the SFC license of local Hong Kong investment manager Triple A Partners, enabling start-ups to avoid having to apply for their own.
“Some managers will have their own SFC licenses, but traditional start-ups, might not have anything. The understanding is with us they can start building their track record with a professional infrastructure and work on their own license later on,” explains Kwun.
The Privium structure, therefore, offers start-up managers a fast track to market. “We’re a kind of incubation platform. When managers have built up a track record and decide to raise external money they can switch the fund into a standalone set-up,” adds Kwun.
Depending on the type of client and its investment strategy, the costs of entering Privium will vary. A start-up fund management team who just wants to get up and running can benefit from the economies of scale and keep costs to a minimum. Conversely, an existing manager may need the additional support on offer by using the middle-office platform. Kwun estimates that the structure can save managers 20-30 per cent overall, compared to going alone.
“Fund administration is an on-going cost for the product, and there’s also a licensing fee for those who wish to avoid applying for their own. So there are various fee components that a manager might incur depending on the overall requirement,” says Kwun.
The clearest advantage of turnkey solutions like Privium, particularly in Asia where tier-one administrators typically overlook start-ups with small AUM, is the inherent flexibility they offer. Setting up a fund is a costly, complex process; having someone take care of it is a clear attraction.
Moreover, because the structure is designed to help smaller managers, the level of service will be comparatively better than that of a major player who’s more likely to pander to the needs of bigger clients.
As Kwun adds: “We have all the service providers lined up, the infrastructure in place, the fund documentation worked out; all a manager needs to do is plug and play.”