Private market firms in APAC face regulatory and operational challenges, particularly with special purpose vehicles (SPVs). While technology and data solutions are prioritized, most firms still manage SPVs in house.
We canvassed the views of 400 senior private markets professionals in Europe, North America and Asia-Pacific in the first quarter of 2024 on a range of industry subjects, particularly the use of SPVs in optimizing transactions. We have used the results of this research to inform our new report, SPV Global Outlook 2024: Charting the Course for Growth in Private Markets.
New regulation in private markets continues to develop at pace, and the impact of some regulations have been particularly challenging for firms in the APAC region to address when operating special purpose vehicles (SPVs). Three quarters (75%) of respondents in private markets in APAC identified the Foreign Account Tax Compliance Act (FATCA) and CRS as challenging, while 67% named ultimate beneficial owner (UBO).
Although a higher number of respondents in APAC than in Europe or North America said that regulatory compliance services such as FATCA, CRS, and UBO registrations were “important services are critical to outsource to corporate administrators,” due to the market being less mature, the vast majority (90%) continue to set up and operate SPVs in house. Nevertheless, outsourcing SPV management to an experienced provider can help firms in navigating these complexities, reducing administrative overhead, and ensuring compliance with evolving regulations.
At the same time, three quarters (75%) found that dealing with multiple stakeholders in different jurisdictions was a challenge when setting up and running an SPV, while 72% cited access to suitably qualified staff as a barrier.
The high demand for talented professionals is caused in part by emerging fund managers moving into the APAC market and competing for the same resources. It makes it difficult for firms to attract the right people, especially when the mix of skills required is changing to focus in greater depth on technical know-how, in areas such as Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance. Indeed, outsourcing SPV management can alleviate these staffing challenges by leveraging a global team of experts who are well-versed in the regulatory environments across different jurisdictions.
The regulatory and operational landscape: A coalescence of complexities
What we’re increasingly seeing in the APAC region is a “coalescence of complexities.” It’s encouraging firms to take a bigger picture view of how they can address all their regulatory and operational challenges with a single strategic approach. Outsourcing SPV management can help here as they enable firms to adopt a comprehensive strategic approach that addresses all regulatory and operational requirements in a cohesive manner, instead of relying on piecemeal solutions that often fall short.
While it’s true that regulatory environments can be very different in countries across the region compared to North America, for example, we’re witnessing a global trend towards standardization—in terms of overall aims and objectives for transparency. The adoption of KYC and AML regulations, as well as new data protection laws, are examples of how APAC is moving further into line with regions such as North America and Europe.
The challenge for firms in the region is two-fold. One, they’re much more likely than firms in other parts of the world to be managing instruments such as SPVs in house than outsourcing them to third parties. New regulation makes administration and governance more time consuming, especially across borders, putting pressure on resources and introducing risk. And two, where firms have brought in services and solutions to help, they tend to support single aspects of operations rather than provide an overall view of investment portfolios and day-to-day business processes.
What we’re hearing from firms now is that they want to move beyond point solutions that use their own siloed datasets to adopt single platforms, which can cover all aspects of their administrative, compliance, and corporate governance requirements. Outsourcing SPV management can offer firms a complete platform solution that integrates all aspects of administrative, compliance, and governance needs across jurisdictions.
Viewing a wider landscape
In the world of SPVs, one of the key elements firms are looking for is visibility of the whole landscape of their investments and entities, supported by institutional-grade data that is a single version of the truth that can be accessed and analyzed for multiple purposes.
We’re also hearing that far from needing a one-size-fits all solution, firms require a certain amount of customization that enables them to respond to common regulatory demands, but also meets their own specific needs for reporting and data management.
The adoption of such technology is at the top of the agenda for firms operating in APAC. The number one priority when selecting an ideal SPV administrator was named by 77% of respondents to our research as “technology and data,” while “sophisticated technology platform” came second, named by 73% of respondents.
The findings demonstrate a growing realization by firms in APAC that by working with the right service provider, they can have access to a technology platform that addresses their data governance requirements today and provides a strong foundation for the future.
How CSC can help
CSC provides technology that can be customized and also integrated with operational efficiencies in areas such as due diligence, onboarding, risk ratings, and data analysis. Our experience of providing both outsourced services and technology to firms across the world, as well as in APAC, means we’re fully aware of not just current regulation and legislation, but also what may be coming down the track. We’re in a strong position to listen, explore, and customize solutions with those developments in mind.
Interested in finding out more? Download and read our new SPV Global Outlook 2024: Charting the Course for Growth in Private Markets.
