SECURITIZATION – NEW WAVE FOR HEDGE FUNDS?

Written by Steve Knabl

Having a goal and vision is only the beginning. Knowing what you want in life is essential if you are going to achieve anything in the amount of time you have. For fund managers with a relatively small amount of assets, usually less than USD 10 million, we know how hard it is to make more out of the capital you have to start building your own Hedge Fund business.

 “Actively Managed Certificates, Total Return Swaps and Exchange Traded Instruments are securitized structures that resolve expensive set up costs and complex management of illiquid offshore structures”

Securitization in brief

Each of the three options available; Actively Managed Certificates, Total Return Swaps and Exchange Traded Instruments may provide daily liquidity, and more importantly, may be traded on an exchange, just like an ETF. Similarly, all three options are structured as securitized investment vehicles and are issued by securities houses. One of the main benefits to you as a fund manager is that it allows you to invest in global markets in a very cost efficient manner. These securitized vehicles, fully audited and regulated, are usually listed on an exchange for ease of access and offer a centralized settlement via any bank.

What’s the difference?

Actively Managed Certificates (AMC) rely on the portfolio manager to advise the issuer on the transactions. The issuer executes the advice and then wraps the assets and the P&L into a structured certificate. The main difference between this option and the remaining two is in who does the trading and how that reflects on you as the fund manager. Total Return Swaps (TRS) and the Exchange Traded Instruments (ETI) involve an external broker in making the transactions; this means that you can do the trading yourself. The broker then enters into a swap with the issuer of the certificate, and profit or loss on the broking account is reflected within the certificate, creating an index that comprises your track record.

Broad Market Access and Flexibility. Securitization through these options also implies that any and all hedge fund strategies can be securitized and issued as an ETI or TRS as there are no strategy or asset restrictions within the alternative investment portfolio underlying an ETI or TRS.

Fast track. Securitization will help you be recognized for your financial achievements (track record) quicker, and therefore, accelerate your market access, which may help you attract capital faster. There are differences between these three options, and it is these differences that need to be explored to ensure that, as a fund manager, you choose the right option for the assets classes you invest in.

 We Are Here to Assist

With years of experience, an extensive network, and economies of scale, we can work in collaboration with renowned issuers to bring you a quick and cost-effective way to launch a hedge fund. Using securitization, along with our versatility, creative thinking, and the latest know-how, you can take what were once expensive to set up and manage illiquid offshore structures and transform them into liquid cost effective and highly marketable securities. With Swiss-Asia, fund managers with a relatively small amount of assets, usually less that USD 10 million, can formally start building their track record through these securitized vehicles.

Our aim at Swiss-Asia is to assist you in making the right decisions for the assets you wish to manage. Securitization supports those starting out, who have yet to grow beyond small personal account asset management.

Watch our Video on Securitization below or click here: https://vimeo.com/154943947

Swiss-Asia: “Securitization”- The New Wave for Hedge Funds from Swiss Asia on Vimeo.