There are both similarities and differences between private funds and mutual funds.

Private fund: A private fund is an investment in securities, assets and/or deposits for which the client normally has tax duty similar to direct investment. Investment through a fund is made in accordance with the investment policy prescribed by the client in line with their objectives and restrictions. Each fund will be managed separately, and the risk can be diversified. The client can offer their comments related to the investment policy, which can be adjusted accordingly. Moreover, all types of invested assets will be in the client's name, and their value will be calculated according to the market price and reported to the client. The client needs to have a considerable amount invested to allow risk diversification.

Mutual fund: A mutual fund is a fund with an investment policy that is prescribed by the management company, and is managed according to the point of view of the fund manager. The client will invest in the form of purchase of investment units. The client can invest without a considerable amount of money, and is entitled to tax exemption.

The two funds are similar in terms of management by professionals and having an explicit policy. However, each investment policy decision should be based mainly on the investment objective.

The expenses incurred from private fund service provision are:

1. Management fee
2. Custodian fee, including other fees and costs incurred as a result of custody of assets
3. Auditor fee (if any)
4. Securities brokerage fee and agent fee, as well as other fees for buying, selling and redeeming securities (if any)
5. Fees for transfer or registration of securities and stamp duty (if any)
6. Other fees or expenses related to fund management that are incurred by legal action

The client will receive a contract for private fund management which will provide details of the type of investment e.g. contract term, costs etc. The client will be able to terminate the contract without advance notice. However, if the management company wants to terminate the contract, it must give notice at least 30 days in advance. If the management company is in breach of contract, the client may file a complaint with the Office of the Securities and Exchange Commission (SEC) for investigation. The client's rights and benefits will be protected in accordance with the related SEC notification.

In managing private funds, the management company must establish transparent and detailed guidelines, systems and procedures for private fund management and submit them in order to obtain a license from the Office of the SEC. Therefore, private fund administrators must strictly comply with such procedures and manage the fund of every client on an equal basis.

The fund managers take care of the investment. They must be approved by the Office of the SEC, with required knowledge on legal aspects, code of conduct and professional standards, and having no prohibited characteristics. Their qualifications are as follows:

• Being an employee of the management company
• Having passed the training courses on securities and exchange law, related rules and regulations, code of conduct and professional standards organized by related associations or training institutions, not more than 2 years before the application date
• Having passed the Chartered Financial Analyst (CFA) or Certified Investment and Securities Analyst (CISA) courses, level 1, or other equivalent courses as approved by the Office of the SEC; and having at least 2 years’ work experience related to securities investment, management of risk related to securities investment, or securities analysis during the 5-year period before the application date; or
• Having passed the Chartered Financial Analyst (CFA) or Certified Investment and Securities Analyst (CISA), level 3, or other equivalent courses as approved by the Office of the SEC; or
• Having been permitted by capital market supervisory authorities of the countries whose authorities are recognized by the management company to conduct duties similar to those of a fund manager.

The management company must manage every client's investment on an equal basis according to the system submitted for obtaining a license for private fund management. Also, the Office of the SEC has stipulated stringent rules and regulations concerning private fund management, and will send officers to audit the performance of the private funds. Therefore, clients are assured that the management company will manage their investment in a transparent manner and without fraud.

Clients will also receive a report on investment progress on a monthly basis. In case of any question or complaint, the client may always make inquiries to the management company and submit a complaint directly to the Office of the SEC.

The custodian of assets of a private fund is responsible for taking care of and safekeeping the securities and other assets of the fund, as well as monitoring benefits including dividends and rights obtained from shareholding in the businesses invested in by the fund. The custodian must be approved by the Office of the SEC; they may be commercial banks, finance companies, securities companies, insurance companies or financial institutions established by special laws.

The purpose of having a custodian is to have in place a check-and-balance system by a third party in order to ensure the security of assets. Regardless of the expense incurred, a custodian is required for this task.

All types of assets of the client under the custodian’s care will be in the name of the client only. However, the Office of the SEC also requires that the management company’s name be specified next to the client’s name, in order to identify the entity that manages such assets.

Whether or not an investment in a private fund has the risk of loss depends on the investment policy and restrictions chosen by the client. If the client chooses to invest in high-risk instruments, e.g. equity instruments, such investment would naturally bear the risk of loss, and if the client chooses to invest in medium-risk or low-risk instruments, the risk of loss will be lessened. However, if the client can hold investment in high-risk instruments for a long term, greater returns may be expected with the reduced possibility of loss.

Investment in a private fund is done by the management company, and the fund manager will closely monitor the investment situation so as to generate maximum returns that are consistent with the investment policy established by the client. Moreover, the client can have better risk diversification.

In managing their own investment, investors must have knowledge related to analysis and research, and be interested in closely monitoring the investment environment, so that they do not miss any good opportunities, and can deal with the ever-changing circumstances. Their risk diversification opportunity may be limited, due to a relatively high minimum required amount of investment fund for individual investors. For example, each individual investment in fixed income securities must be at least THB10 million.

Yes. A private fund will have a team of fund managers with experience in the investment and approved by the Office of the SEC, who will closely monitor both the domestic and overseas investment situation in order to analyze the suitable investment approach and direction.

Furthermore, there are marketing officers who provide recommendations on the types of investment that match the client's objectives and investment climate in each time period. The marketing officers will also provide after-sales service so as to help the client gain a fuller understanding of the management company’s management principles, and of the investment itself.

The marketing officers will give advice and make plans for clients’ investments, including determination of investment policy to suit their requirements, objectives of investment funds and acceptable risk appetites. Before investment, the marketing officers will have a talk with the clients about their objectives, requirements and other details, so that they can offer the investment products that best suit them.

The returns of a private fund investment depend on the types of investments chosen by the client, and the investment climate in each time period.