Swiss-Asia Financial Services Pte started a hedge-fund platform in Hong Kong, adding to one in Singapore, to meet rising demand from smaller funds seeking to cut costs amid tighter regulations.
Two funds with assets under management of between $10 million and $30 million are in the process of joining the Hong Kong service that provides smaller managers with infrastructure, office space and helps them with their compliance requirements while allowing them to focus on investment decisions, said Omar Taheri, business development manager at Swiss-Asia. The Singapore-based firm plans to add five funds in Hong Kong within the next 12 months, he added.
Hedge-funds managers with smaller capital are increasingly joining platforms, which provide non-investment services, to cut costs and comply with stricter regulations that require them to devote more time to administration tasks. Swiss-Asia has signed up seven managers so far in Singapore, out of which five started this year, Taheri said. Another four are in the process of starting in the city-state, he added.
“Starting on a platform allows fund managers to focus on their investment style while having risk management and fund administration at reduced cost,” said Mohammad Hassan, a Singapore-based analyst at data provider Eurekahedge Pte. “In particular, it is useful for smaller funds.”
Asia-based hedge funds oversaw a combined $81.6 billion as of May, according to Eurekahedge. In Singapore, 284 fund-management companies had $15.4 billion of assets under management as of March, compared with $25.4 billion managed by 455 firms in Hong Kong, it said.
Swiss-Asia already provides a similar service, run by a team of six, for its wealth-management customers in Hong Kong, Taheri said. He will be among those running the new hedge-fund platform and Swiss-Asia will hire more staff for the project, Taheri said without elaborating.
Fund managers are joining platforms as tightening regulation of lenders and asset managers globally increases administrative and compliance work.
The U.S. Foreign Account Tax Compliance Act, or Fatca, enacted in 2010, increased hedge funds’ requirements to be informed about U.S. investors, while the European Union’s Alternative Investment Fund Managers Directive, or AIFMD, asks managers to reduce organizational complexity and centralize management company activities, according to a paper by the Alternative Investment Management Association.
The Monetary Authority of Singapore in 2012 introduced new regulations, which affect smaller hedge funds. Registered fund managers, as they are called under the new regime, now must have at least two relevant professionals with a certain level of experience as opposed to one under the old rules.
“Being the biggest hedge-fund center in Asia, Hong Kong is the right match to our existing platform in Singapore,” Taheri said. “The advantage has become even bigger because of the new rules.”