A Private Fund is "established by an individual or group of individuals and arranges for the portfolio to be managed professionally in order to generate returns from investment in securities (the portfolio may or may not also include other assets); the investment management process would be a typical business arrangement entailing fees or other payments." Stated in another way, Private Fund management "is a professional service providing investment management service for money or assets of an individual or group of individuals, who would also like to take part in structuring their own investment policy; as such, the investment management company shall adhere to the guidelines and restrictions contractually agreed as it manages the client's portfolio."

 

The investment management company will require information from the client with regards to financial standing, financial obligations, intended investment horizon, extent of prior experience with financial investments, risk tolerance levels, and desired levels of returns. With a more accurate assessment of the client's position (a process also commonly referred to as "Know Your Customer") an appropriate investment plan can be structured for the client ("Suitability"). Clients of Private Funds will tend to be high net worth individuals or group of individuals.

A contractual agreement is made between the client and the investment management company (or financial institution licensed to provide Private Fund management services). The client continues to retain ownership in those assets being managed, including retaining ownership title to the assets. The investment management company is referred to jointly with the client on account names, in order to clearly distinguish that the assets belong to the client but is being managed by the specified investment management company. Since the client retains ownership of the assets, the nationality of the Private Fund will match the nationality of the client as well. Therefore, for any returns generated by the Private Fund's investments such as dividends received from stocks invested or capital gains earned from a sale, the client shall be subjected to any applicable taxes on such income at the same rate as if the client had been holding these assets directly.

The client may submit securities and assets already held to the investment management company to set up a Private Fund.

 

Type of Securities:
Include treasury bills, government bonds, notes, stocks, debentures, unit trusts, stock warrants, debenture warrants, unit trust warrants, and any other financial instruments allowed by the SEC.

 

Type of Assets:
Includes cash, bank deposits, certificates of deposits issued by commercial banks or finance companies, promissory notes, commercial paper, outright purchase of financial obligations, stock borrowing obligations, and any other financial instruments allowed by the SEC.

Private Funds
allow much more flexibility with regards to investments as individual clients, or group of individual clients, owning the fund may readily modify the investment objective, as described by terms and regulations of the SEC.

 

Mutual Funds
are sums mobilized from numerous individual investors through the subscription of unit trusts of the fund. The fund would be registered with the SEC as a separate entity and invest that money in accordance with the investment policy stated in the approved fund scheme.

1. The investment management company will consult with the client or group of clients to formulate an investment policy that is suited to the client or group of clients, taking into consideration their financial standing and financial obligations, investment objectives, financial goals, preferences or restrictions regarding investments, and extent of prior investment experience.
2. Private Fund management requires a contractual appointment of the fund manager which will manage the fund strictly according to the policy agreed with the client. The investor may terminate the contract without prior notice; the fund manager may terminate the contract by indicating in writing and notifying the client at least 30 days in advance.
3. The net asset value of the fund is determined using the market price of securities and assets held by the fund. The price of those securities and assets may increase or decline on a daily basis, therefore the net asset value of the fund may increase or decrease on a daily basis as well.
4. Fund performance is regularly monitored, comparing changes of the net asset value against benchmarks which are standard indices. Should there be any need to modify the investment policy, there would always be joint consultations between the investor and the investment management company.
5. Reporting the progress of the fund to the client or group of clients on a regular basis.

Investors may structure their own investment policy as desired
by consulting the fund manager, in order to configure an investment plan or strategy accordingly or to fit the prevailing investment climate.

 

Alleviate the burden of investing by yourself.
Through these funds, the investor does not need to laboriously make the effort to undertake the investing process themselves which entails transacting securities, accounting work, and valuation.

 

Convenience.
Modern portfolio management systems support the Private Fund portfolios extremely well. Transaction processing and accounting systems are handled by sophisticated computer systems that are accurate and can report the fund's progress daily, therefore readily enables close monitoring of the fund's progress.

 

Investments are managed by professionals.
Staff are fully qualified and licensed by the authorities. Investment professionals are better positioned to access investment information, contact senior management of companies invested, obtain research analysis, and receive quick updates from advanced news sources.

 

Investment management company has superior size advantages.
Better economies of scale and positioning means better benefits for the investor.

 

Wider investment choices.
This is especially evident in the case of exploring new issues or new types of investments which could offer better returns. In addition, the fund will also be eligible to invest in issues which are normally limited to institutional investors.

 

Safekeeping of portfolio assets.
The fund's assets are kept with a Fund Trustee whose qualifications are regulated by the SEC and have been carefully selected by the investment management company.