Article featured on Tenor Digital’s website.
In this article, we sat down with Harvey Tian, Head of Loan Administration and Agency Services at Suntera Fund Services. Harvey delves into the evolving role of private credit and shares his expertise on the industry’s challenges and opportunities. Plus, you’ll learn a little personal trivia about Harvey that you won’t want to miss!
Q: Please introduce yourself, your current role at Suntera Fund Services, and your background.
A: My name is Harvey Tian, and I am the Head of Loan Administration and Agency Services at Suntera Fund Services. We conduct our business a little differently at Suntera by consolidating the traditional loan administration and loan agency functions to provide fund managers with a one-stop solution for their middle and back-office needs. We perform many tasks that a firm’s middle and back-office teams would, such as helping review credit agreements, closing deals, processing invoices, and much more
Before joining Suntera, I spent five years at Alter Domus working within their trade settlement team. Then I moved to its loan administration team and finally, to its agency services team, dealing with syndicated bank loans and bilateral loans that are part of private credit.
Q: How would you explain “private credit” in layman’s terms?
A: Private credit refers to loans originated by private lenders to privately held companies. Often, this money is used to scale businesses, develop infrastructure (like roads or bridges), or invest in real estate.
Private credit has been around since the 1980s, but the business took off after the global financial crisis in 2008, when most banks pulled back from business lending. Private credit funds stepped in to provide liquidity to businesses. However, banks still play a key role in the private credit funding process.
We have seen banks acting as participating lenders – where they are not the lead lender. In some cases, banks also act as “first out” lenders, which means they are at a higher level in the private credit deal structure. If a deal defaults, for example, banks can liquidate the asset before the lead lenders.
Q: How has the role of a fund administrator changed in the past 5 years?
A: Many firms’ operations have evolved to separate departments for loan administration, loan agency, trade settlement, and fund administration. This structure works well for syndicated bank loans because there are many lenders involved, requiring clear organization.
However, we have seen a lot of interest in offerings from fund managers, usually smaller firms under $1 billion AUM. They are looking for service providers who can perform all the necessary job duties under one team. At Suntera, we consolidate loan administration and loan agency functions into a single team, providing all the information and services needed in one place.
Additionally, there is a growing demand for more data transparency and controls. Fund managers want to take ownership of their data and request customizable solutions from their fund administrators.
Lastly, fund managers are investing more money in technology. They want software with self-service capabilities, so they don’t have to constantly ask vendors for reports or details about their investments.
Q: Given your experience, what operational advice can you give fund managers looking to enter private credit?
A: I have two recommendations for fund managers looking to enter into the private credit business. First, invest in technology early or hire a fund administration partner who does. This is crucial because it is cost-effective and reduces a lot of friction as the firm grows.
Second, if you decide to hire a fund administrator, choose one that can provide customized operational solutions. This means selecting a fund administrator that offers bespoke solutions and is flexible in terms of technology. At Suntera, we offer a variety of solutions to our clients. For example, if a client wants to use Tenor Digital, we will license that product for them, manage the system, and process all activities within that product. This way, we can meet our clients’ needs and facilitate their operations effectively.
I’d caution fund managers against going with large fund administrators. Such vendors may require them to follow their standard processes and reporting, which may not be flexible enough for them as they enter into private credit. Smaller to midsize fund administrators like Suntera Fund Services can provide a more personalized service to their specific growth needs.
Q: How do you envision the role of technology, like AI, impacting the operations of fund administrators and private credit firms?
A: By nature, private credit loans are not standardized. Each lender may use a different credit agreement with covenants specific to that deal. This makes it difficult to train AI to identify critical information on these agreements. There remains a large gray area in how loan terms are interpreted in credit agreements and how they operate in the market. At this point, I believe it is challenging for AI to handle these complex tasks on its own and I advise against the use of AI for private credit agreements.
However, there are opportunities for AI to streamline very manual processes, such as processing loan transactions or automating some of the routine Excel spreadsheet tasks.
Q: A little light-hearted question for you. What was the first car you ever owned?
A: The first car I owned was a 2008 Ford Mustang. Nearly everything in the car was manual. I remember always having to remember to turn the lights off before parking at night. Often, I’d wake up the next morning and the car wouldn’t start. I saw that the lights were on the entire night, and the battery died. Despite this, I still loved my first car. I sold it years ago, and now I drive a Tesla, which couldn’t be more different.
