#7 Sean Green - Kyros Capital

The Vestr Securitization Podcast

Are you ready to discover how a fund structuring expert is helping drive AMC adoption across Asia through a Luxembourg-based securitization platform?

In this episode, we sit down with Sean Green, Head of Distribution at Kyros Capital, a Singapore-based firm that has built one of the most structurally innovative AMC issuance platforms in Asia. After two decades in fund administration and structuring across Hong Kong and Singapore, Sean had an epiphany about the advantages of AMCs over traditional fund vehicles.

He walks us through why Kyros chose a Luxembourg securitisation fund over a corporate SPV, how ring-fenced sub-funds eliminate issuer risk and cross-contamination, and why he believes a significant portion of today's AMC market is sitting on a ticking tax time bomb created by post-2008 substance-over-form regulation. He also shares how Kyros is currently securitising real estate while tokenising the AMC for investors who want to subscribe in USDT rather than fiat.

You will also hear insights on:

• Why the corporate SPV structure so widely used in AMC issuance may be fundamentally incompatible with modern CFC and substance-over-form tax rules

• Why Asia could become one of the fastest-growing AMC market globally

• How tokenization and stablecoin subscription rails are being layered onto traditional securitization
  

This episode is essential listening for asset managers, family offices, wealth advisors, and investment professionals seeking to understand how AMCs are evolving beyond Europe and why they are increasingly attractive alternatives to traditional fund structures in Asia.

🎧 Listen Now On: Apple Podcasts | Spotify | Youtube | Podomatic

🎙️ Transcript:  

Stefan Wagner: 00:23 Hello and welcome. In this series, we explore the cutting edge of investment innovation. I sit down with leading asset managers who use securitization vehicles to execute their unique investment strategy.

Sean Green: 00:36 There will always be a market for traditional funds, maybe on the larger side, but I think we can sweep up anything under, you know, 100 million. Really, I think the market is huge for us.

Disclaimer: 00:49 The information in this presentation is for informational purposes only and does not constitute an offer, solicitation or recommendation to buy or sell any financial products. It is not intended as investment, legal, tax or accounting advice. Always seek the advice of your financial advisor or other qualified professional regarding your investments.

Stefan Wagner: 01:11 Good morning. I'm very excited here. My guest today, Sean Green, head of distribution at Kyros Capital. We've been talking for a while to get you on the podcast. I'm very excited we finally made it. So thank you very much, Sean, for taking the time. Thank you for having me. Where do we catch you this morning? Where are you calling from?

Sean Green: 01:31 So I'm actually based in Singapore. So I'm originally English, but I've been in Asia for 20 years, 10 in Hong Kong and 10 in Singapore.

Stefan Wagner: 01:44 I mean, maybe you could share a little bit more for the listeners who might not know you a bit about your background.

Sean Green: 01:50 No, yeah, I actually, previously to Kyros I was in fund administration and fund structuring. So I used to help family offices and fund managers set up structures for fund vehicles. And those fund vehicles could have been for private wealth, so family offices in Asia restructuring their assets into a fund. Or help in hedge funds p funds vc funds set up and structure and. I'm in high the Hong Kong or Singapore and that was mainly through a. I came a vehicle typically came in a pc or a you know if it was a small phone maybe a bvi, I'm more recently a Singapore vcc which is akin to a came in a pc. and Hong Kong also has its own structure now which is called a Hong Kong osc but they're all i would say corporate vehicles that are structured as a as a fund i was also the first person to help launch a crypto fund in Singapore and a tokenized fund in Hong Kong as well.

Stefan Wagner: 03:06 And what made you switch from the fun side to amc's actively managed certificates?

Sean Green: 03:13 Yeah I never i got to be honest with you in Asia AMC's are actively managed to get the not super popular. Intel the not well known let's say I'm somebody try to explain to me about four years ago what an amc was and they did an unbelievably bad job. I just kind of dismissed him and then i met Alessandro is the founder of a car and he explained in the in depth what an amc is how it works. are the cost structure the flexibility that the quickness in and the way you can deploy and set up an AMC and all of a sudden i just like an epiphany really i saw all the. Kind of advantages and all the struggles that your typical fund manager deals with when setting up a fund and how an AMC would. really answer all those questions that they had all those struggles that they had and took the last two years we've been speaking to managers external asset managers family offices I'm really doing a lot of education working in asia.

Stefan Wagner: 04:33 What is what is sort of usually your elevator pitch when you get the chance to talk to somebody who hasn't heard about amc.

Sean Green: 04:41 Yeah i just had to be clear if you could set up a fund light vehicle in two to three weeks with no front costs and you, what's exactly the same way as a fund but just easier and you can have a daily and instead of a monthly with a with a t plus ten or twenty. Most people say I don't think I believe that exists but maybe a little bit going to.

Stefan Wagner: 05:19 the structure that actually Kyros uses, you know, it's a securitization structure, but maybe you can go a little bit into explain what that means, what benefits it brings. And I think particularly you have a very interesting way how it's been implemented. I mean, there's thousands of securitization vehicles, but I think Kyros stands out quite a bit in that.

Sean Green: 05:40 Yeah thank you for those who are listening am i typically amc's were originally issued by banks your new bs is all your phone tables your Julie spitz and I'm more recently to clean Asia you are Goldman Sachs and Morgan Stanley. Because they wish you in them on balance sheet. Then they would typically need to long only maybe some futures certainly no leverage. You know they can't be private assets in the definitely not gonna do any crypto assets i think people came along about fifteen years ago and said alright we gonna offer something slightly different. I'm so there's a lot of people in the market that structure and amc through corporate vehicle. So they would set up a corporate SPV in let's say Guernsey or the Cayman or maybe even Luxembourg and then they would issue the notes out of all the certificates out of a corporate SPV. Now i think we'd all agree that fit from fifteen years ago to today the world is. Change drastically specially after two thousand and eight now you have things like a consolidation risks you have a off balance sheet a problematic trying to create an off balance sheet because it's very hard also corporate SPV now fall under a different tax rate regime. The way we do it is we have a Luxembourg securitization fund, and each we set up segregated cells or segregated compartments or sub-funds. These sub-funds are off balance sheet from us, so we're just the arranger of the deal. Carol's Capital is what's called the arranger, or maybe like the salesperson of the deal. But if we go bankrupt, then the assets within the compartment do not come onto our balance sheet. And if there's a problem with any of the other ring fence sub funds, then they're not contaminated either because they're also ring fence from each other. I always give an example of if Blackstone or Blackrock set up a fund, if Blackrock goes bankrupt or Blackstone goes bankrupt, You don't have to consolidate the fund onto black rocks balance sheet. The assets are still there. Maybe you need to liquidate the fund to get your money back, but you don't lose your assets. And now if a, if a bank, for example, sets up an SPV. they have to consolidate that SPV onto their balance sheet.

Stefan Wagner: 08:30 That is always a challenge for the banks of ensuring that it doesn't need to be consolidated because that's the super goal what we call it. I've been through that one at a large investment bank of trying to avoid that risk and we had Clients to be very honest on our side investor who suddenly stop their business because a regular said hold on you gonna have to consolidate so. It's just definitely something one needs to think about it and everybody said i want my own vehicle maybe speak to Kyros first use their vehicle and. Avoid all that nightmare you mention something interesting here which you called it the Luxembourg's i think securitization fund. Normally that doesn't come, you don't use the word securitization and vehicle and corporate vehicle and fund. Maybe you can a little bit more explain why in your case that's unique, why that is the case.

Sean Green: 09:26 So the securitization law has been around in Luxembourg since 2004. And the amount of funds that use this law, I can tell you, when we set up, were 90, 9-0. So on our incorporation number is 0-9-0. Now, about 45 of those have already been liquidated. And typically, they were used by insurance companies as one-off transactions. But as I said, because tax laws have changed drastically in the last 15 years, I'm when we look to the tax laws we said that if we if we go down the route of setting up a let's say a corporate sbv structure, we're gonna fall and we're gonna be full file of these new tax laws for example. AMC's are not they fall under a if you're issuing them out of a corporate SPV you fall under the corporate. SPV laws or corporate laws you're taxable if you issue it out of a fund then you fall under the fund laws so that the two completely different laws. the two completely different tax laws and so i work around was to use the phone the downside of that is setting up a whole funding for structure in Luxembourg is i can tell you now.

Stefan Wagner: 10:48 Extremely expensive so i speak of i can only echo that out of experience yes you touched on something here which is taxation. And that's obviously something you know, many of the investors are potentially could be concerned with. I mean, I'm not a tax expert, but I think there could be a potential issue with taxation with many other AMCs. I think you called it the text time bomb. Can you a little bit double click on that one and go into a bit deeper?

Sean Green: 11:25 Yeah. So after 2008, I think a lot of countries got fed up with people Essentially setting up by eyes or Cayman's or maybe guernsey company is jersey company Islam and companies. I sent you say look my company is based in the Cayman or is based in the by is based in guernsey i don't have to pay any tax in the jurisdiction i am it. So the essentially the G20 got together in the OECD, and they said, no, no, you can't just set up a company above a nightclub in the Cayman Islands and claim that you don't need to pay any tax because the Cayman Islands don't charge you any tax. So they introduced something called substance over form. And substance over form essentially means who is in control. Who has the rights to the company who is managing the company where the revenues derived from. That is where it will be taxed not where the entity itself is I'm so from there. I'm actually some other laws that came in what one of them is called a foreign control company lol csc. I'm and csc rules are if you're let's say a German company or you're a Swiss company and you happen to set up an SPV in guernsey.

Or in the Cayman islands you can't just say i don't pay any tax in guernsey or in the Cayman islands anymore because. You are controlling that company, you're in Switzerland, you're in Germany, so you are then now subject to German tax laws or Swiss tax laws. Now, the reason we chose a fund structure is tax-wise, a fund structure is a pass-through structure, so investors always pay the tax on their capital gains. And the manager always pays the tax or the index sponsor always pays the tax on his or her income that they derive from the product in a sense. But a lot of these rules, they were not brought in for AMCs, they were brought in for Google, Microsoft. I love the banks that i was taking advantage of love these tax loopholes but it's just it's under corporate law and corporate tax law changed and you know develop. So when we can set up our structure we said right there's a massive time bomb. Waiting for these amc corporate structures or corporate spd structures to we prefer to use a fun structure now it cost is ten x more to set up and it took is. probably eighteen months longer than it should have done to set up but I think I think in the long run it certainly we could sleep at night.

In 2008, you saw everything that the banks used to do. They moved into fund structures and you saw the explosion in assets under management of Blackstone, BlackRock, Millennium, and essentially the banks became service providers to these fund vehicles. What you didn't see happen is black stone black rock or millennium set up corporate vehicles for their investors to invest in because they know that if you set up a corporate vehicle, you then have to consolidate that onto your balance sheet. And just by putting it into a trust and say, well, now this belongs to the trust. You know tax regulators and accounting regulation says no that's not true just because you are the legal owner does not mean you are the actual owner of the vehicle. If you are taking benefit from the vehicle if you decided if you're the one who decided to set up the vehicle if you decide what's happening within the company. Then you're the one who owns the company even though it may say trustee x y that is the company technically you are the one controlling the company so then before you need to consolidate. Onto your balance sheet and because it's a corporate vehicle then you have to pay taxes on your on your capital gains. I'm just because you're in jersey guernsey the island man that came in and you set up a company. Does not mean that gives you the right to then not pay any tax if you're managing that company from another jurisdiction that has a higher tax rate. For a fund it generally a pass through entity because the investors attacks and in their own jurisdiction wherever they are that they're holding. an investment and then they pay tax on their investment but if you're a company you then fall under the same as i said before you then fall under the same laws as Microsoft.

Add as google as ubs as you know it used to be credit so it's obviously all Lehman brothers previously. You can't just say no sorry this company belongs to a trustee and it's got nothing to do with me even though I control the company I take all the benefit out of the company and I just tell the trustee what to do. It doesn't work like that. Lehman tried it, Lehman wanted to repackage all their bad debt into a company and put it into a trust and the regulators said you know you're crazy you can't do this. So in our opinion there is a big ticking time bomb there. where we believe that a lot of these SPVs that have been set up have potentially got a huge tax liability for the investors. They're structured as if the world was 15 years ago and not the world for today.

Stefan Wagner: 17:17 I mean, you are located in Singapore. Maybe you can tell us, the listeners, a little bit what you sort of see in Asia, particularly in Hong Kong and Singapore, and maybe how they differ, the two markets.

Sean Green: 17:30 Yeah well I lived in both I spent ten years in both. Historically Hong Kong has been investment banking center and an ipo center where Singapore was more a wealth management hub and a regional place to do business in south east Asia. But typically the ipo market for example is bigger in Hong Kong then it is in Singapore. People don't list in on the Singapore stock exchange but people want to list on the on the Hong Kong stock exchange.

Stefan Wagner: 18:04 In Singapore have come across I think it's called the variable contribution fund. Not a variable capital company. How does this sort of compare to an AMC.

Sean Green: 18:19 I would say variable capital company probably get into trouble for this in Singapore maybe they'll lose my visa but essentially it's a. I came in sbc with a Singapore flag to corporate vehicle it is a corporate vehicle it. It's a new vehicle so tony been around for about five years. and it's typically used by Singapore manager so does the Singapore mas which I guess is a little bit like the mother but I'm also the kind of like the defacto central bank. Give a lot of subsidies to promote the vcc do you find a lot of people in Singapore have a vcc essentially was free to set up. But it's still a fund. It still takes three, four, five, six, nine months to set up. You still have to go to a lawyer and pay 50, 60, $70,000 for a template PPM. Um, you, you have to wait three months to get a bank account open. Um, it's very much a, uh, a slow methodical process.

Stefan Wagner: 19:33 I mean, how does then in a sense, let's go back to the AMCs we talked about, you know, there's on balance sheet issues. You might have a great brand name with it, but you take clearly the credit risk of that issue versus we call, I call them the off balance sheet, the securitization vehicle, SPVs. What is sort of the preference of that in Asia or how do people look in Asia? Do they understand the risk between them or is it? branding metals more than ring fencing of assets.

Sean Green: 20:07 No I think there's two things that when they have used them or they've come across them typically it's been an on balance sheet experience. So it's been with one of the typically one of the Swiss private banks. And I think what they realize when they use let's say one of these on balance sheet vehicles is that they're very restrictive. they can only do equities typically it's long only maybe us stocks maybe some Japanese dogs but it's not gonna be Malaysia, Taiwan. Indonesia it's not gonna be anything what I guess some people would call exotic in that sense there's no private assets. I'm silly no crypto assets either but I think once people use one of these bank came see the also realize that. once you're in a bank amc on balance sheet amc you can attract in it so the on balance sheet. Provider then has you know you can't change the broker right so if for what if.

You know you had you been charged two basis points for a trade and then it goes to four or six or eight. You're kind of stuck you can't open architecture it's a closed architecture and you take that pricing and you also take whatever markets they want to provide to you. I know one on balance sheet provider they did in Korea and then all of a sudden the head office in Zurich side of Korea that we don't want to deal with this is a big market in Asia I need to turn it off. So you don't have that option to then go and use another broker in that sense. And ultimately, as a manager, I always think you're there to mitigate risk. And if you're using an on balance sheet vehicle, you simply cannot mitigate that risk. And sure, if you're a UBS, is UBS going to go bankrupt? Probably not but we've had credit Swiss we've had Lehman Brothers we've had Royal Bank of Scotland we've had Merrill Lynch so there's been plenty of banks that have gone or investment banks that have gone.

Stefan Wagner: 22:36 Maybe something you can tell us maybe don't name names but you know of an interesting structure that you put together how you were able to help that specific client and Maybe something you know that wasn't possible a few years ago or even not possible for an unbalanced sheet issue.

Sean Green: 22:56 Yeah we're currently doing a deal where we're essentially securitizing some real estate. And then we are tokenizing the amc we were with a license digital banking in Singapore. I do essentially they will they will provide the let's say the token issuance I'm we. Secure ties the proper and we should also leave the MCS all the notes the and then did the digital bank. Then issues a token so people can subscribe. In cash through is no route through their private bank or a brokerage and we're actually wanted one of the big thing here in Singapore is. There's a company called me who are the interactive brokers of Asia, I get one out of every two people in Singapore has a movie. Add to it that they'll accept that you can also purchase the notes through them or if you got let's say digital assets you got USDT, you on board with the digital bank in Singapore they do all the k y k y c i do so do the k y t on the on the wallet and the stable coins that being used and you can subscribe. True three stable coins as well so i think. I think that's quite an interesting deal that way you know where we're doing at the moment.

Stefan Wagner: 24:29 And why did the client choose to tokenize it as well.

Sean Green: 24:35 Yeah so the client has an investor pool that has USDT. Some of them are, but he also has an investor pool that has traditional cash. Yeah I guess for people who are in digital assets you know digital assets it's a bit of a religion in that sense so they want to stay in USDT. Not many want to come out of it again in back into fiat I've noticed that. Yeah so this is the way of getting access to traditional assets while still being in crypto or stable coins.

Stefan Wagner: 25:15 And AMCs are getting more and more traction in Asia, but what is sort of your future outlook for what's going to happen there in the industry?

Sean Green: 25:25 I think it's massive. You know if I look at my previous background the complaints always the same why does it take so long to set up why am I being charged fifty to a hundred thousand dollars for a lawyer for a for a template. That they probably use with ten of the funds. Why can't, why does my fund administrator take t plus ten t plus twenty to do to deliver me a navy. Why is it? Why do I have to send a subscription form with a wedding. I need the list goes on. I don't see cost is very prohibitive right you know it's a couple hundred thousand dollars to set up a phone. It's probably the same to administer it you got to go find an administrator you got to go find an auditor. It's a very cumbersome process to when we meet managers. I say to them look if you just want to do something simple let me tell you just want to do a us equities or you want to do a long short or you want to buy some Malaysian shoes or maybe some southeast Asian or whatever it may be any anything listed. Um, we can be up and running in, in two weeks and you can be raising money in, you can be investing. Invest the money in three weeks that they fall off the chair, to be honest with you. They actually don't believe me until, uh, yeah.

Stefan Wagner: 26:59 No and how was sort of does that what you expect what sort of the vision for car was going for us. The coming years I think.

Sean Green: 27:10 There will always be a market for traditional funds maybe on the on the largest side but I think we can sweep up anything under a hundred million. Really i think i think the market is huge first.

Stefan Wagner: 27:23 I always like to ask a few personal questions if that's okay. I mean, you probably as many people in this industry spend all day thinking about how do I best allocate my waking hours when I'm awake. So how do you deal with it? How do you, I call it the information diet, you know, where do you get your information for what you prioritize and what do you deprioritize?

Sean Green: 27:50 Oh yeah it's probably a bit boring really it's probably the standard stuff you know there's Bloomberg there's a few podcasts you know if you're at the gym or you're running or you know we obviously we do a lot of meetings so if you know if you're walking between meetings you can plug into the news for five or ten minutes. It's mostly standard stuff and then obviously there's more on the tax side and the structuring side which is what you call bedtime reading about that put people to sleep quite quickly.

Stefan Wagner: 28:27 And the other question I always like to ask is what is your favorite finance book or one two three i mean.

Sean Green: 28:33 Yeah i did the great one called the quiet risk. The author is Alessandro Ginastera I recently read a book called too big to fail. I don't know so i choose a pretty interesting book called nineteen twenty nine people always think the market collapsed eighty percent in nineteen twenty nine but actually it was over three or four years.

Stefan Wagner: 28:57 I mean I poked you with a lot of question today is there any question you would like to ask me.

Sean Green: 29:03 Where do you see, obviously you speak to a lot of people who deal with AMCs, where do you see the market go in the next five to ten years?

Stefan Wagner: 29:14 I mean, number one, I would say there's more and more markets or regions coming online and realizing it. I mean, all the banks that have been operating in Switzerland, most of them operate outside Switzerland as well and have been taking it there. Also the same thing with the securitization vehicles. So there's new markets coming, I think, who are becoming more comfortable with it. More, I would say, jurisdictions who are historically maybe didn't have a securitization vehicles. set ups that allow the AMCs are getting interested in allowing that one. And a trend that I definitely see is that it's becoming much more professional in the sense of sophisticated the strategies are being traded. And there's still a significant trend I would say of securitizing non-bankable assets.

Sometimes not even to get access let's say to commodities or something like this. not even purely for performance reasons or getting access or exposure, but to actually make it in a security which you can then turn around, you can get booked and either it's for inheritance reasons you want to give everybody a share in something, it's a very easy way, they call it a fractional bond sometimes, or it's because you can turn around to the private bank and say, can you give me loanable value against this asset? And maybe the last thing is also was a little bit as a trend is more and more. The vehicle because it's so easy and affordable to set up it's getting used also much more to express. Individual wealthy individuals view and how they want their money invested and because of the macro environment we see more and more. People being able to add value to active management back into it. Fantastic, John. If anybody wants to get in contact with you, how can people get in contact with you?

Sean Green: 31:29 Yeah, so they can drop me an email at green at Kyroscap.com or they can find me on LinkedIn if you go to Kyros Capital Singapore and then you can find me there under people that work there.

Stefan Wagner: 31:44 Excellent. Thank you, Sean.