As the capital markets rapidly evolve in and around Greater China, Chinese fund managers and their domestic investors are showing a growing interest in diversifying their portfolios through global investments. Popular domiciliation choices for expansion include the Cayman Islands, BVI, Hong Kong and Singapore. Hong Kong has experienced a surge in popularity due to its advantages such as its global investor and investment access, as well as regulatory familiarity and geographic proximity to China.
When expanding offshore, Chinese fund managers must evaluate investment opportunities in addition to market dynamics in China and the offshore markets. Navigating accounting, regulatory, compliance and tax complexities can be challenging, especially with a lean team. From our experience, many funds underestimate the strategic significance of a future-proof operational plan and scalability for sustainable growth. If these factors are not properly weighed in, it is not uncommon for funds to encounter operational issues in a few years, hindering their lifespan.
Don’t Get Stuck in a Rigid, Insufficient Solution
During a weak market, fund managers face increased scrutiny from investors, regarding both the funds’ performance and operational efficiency. While the former correlates with the undiversifiable market risks, the latter is within the fund managers’ full control; yet, it is often neglected. When setting up offshore entities, these fund managers opt for smaller or local administrators solely to minimize costs. There is a misconception that basic services will suffice but they discover later that the infrastructure they provide is insufficient to meet evolving needs when they need to scale up or explore different structures.
The ability to provide middle and back-office services should also be a key consideration. A trade matching and settlement offering allows clients to tap into the technology provided by the larger players to avoid an inefficient operational infrastructure that may expose Chinese fund managers to market penalties and interest claims. Outsourcing to an end-to-end service provider for operational efficiency can avoid the substantial investment required for building or overhauling middle-office operations.
For Chinese fund managers playing the long game, modularizable mid- to back-office solutions will be the holy grail as they take the funds offshore. This offers initial pricing agility and ensures scalability over the next 20 years. When large and established hedge funds looking for precise customization, they can mix and match solutions from our unparalleled range of product portfolio, including trading and execution management tools, real-time P&L, FIX connectivity, mobile app access to performance information, dedicated services and hosting facilities. Unlike other administrators, at SS&C we firmly believe, heavily invest in and execute technology research and development with a dedicated team of 300 experts specializing in integrating cutting-edge technologies like artificial intelligence into everyday solutions.
Arm Yourself with Local Expertise from a Global Provider
To ensure a successful offshore expansion, it is also crucial for Chinese fund managers to establish partnerships with reliable service providers who have a strong local presence. Over the past 35 years, we partnered with over 2,500 clients as an extended team to address the set-up and operational needs of funds of any size, asset class and structure. With our extensive geographic coverage and a multilingual team, Chinese fund managers can access our white-glove service no matter where their fund is established. Whether it's in the Cayman Islands, BVI, Hong Kong, Singapore, Luxembourg or other jurisdictions, we are well-positioned to provide exceptional support anytime, anywhere.
Innovation is at our heart—SS&C offers a comprehensive range of services, including fund administration, fund accounting, middle office, trade settlement, regulatory reporting and tax services, to support Chinese fund managers in their global endeavors as they navigate complexities. Our comprehensive hedge fund solutions cover every step of the process, enabling funds to leverage our global expertise and local teams whenever they venture into new jurisdictions.
To learn more about how our extensive range of hedge fund solutions can take your business to the level, download our “Changing Fund Administrators is Easier Than You Think" whitepaper.
