How Dovetail Became GIFT City’s Go-To Fund Administrator

1.  What inspired the founding of Dovetail Group, and how did you identify the market gap in asset servicing?

The story of Dovetail Group's inception in 2017 begins with the co-founders' realization of a significant market opportunity. In the Indian financial ecosystem, asset servicing functions such as custody, fund administration, and clearing were predominantly handled by large banking institutions, often entangled with their asset management and brokerage arms. This often raises concerns about conflict of interest and data privacy for clients seeking unbiased service providers. "We saw a unique opportunity to build something independent and free from conflicts," shares Dev Sampat. "Our goal was always to create a firm that champions transparency and specialization.".
 
2.  How does Dovetail’s independent model address the conflicts typically seen in traditional financial institutions?

In India, asset servicing has mostly been handled by big banks that offer these services alongside other financial products. However, this can lead to potential conflicts of interest. For example, an asset manager at a bank might worry that their investment strategies could be shared with other parts of the bank that handle trading or wealth management. As a result, there's a growing demand for independent firms that can provide these services without such conflicts. 
 
The market for asset servicing in India is changing quickly due to globalization and more foreign investments coming into the country. Investors from around the world are attracted to India's strong economic growth, increasing the need for transparent and efficient asset servicing. This situation creates opportunities for independent companies like Dovetail Group, which can offer customized solutions.
 
3.  Can you elaborate on the challenges and milestones during your regulatory journey with SEBI, RBI, and global bodies like DFSA?

In the initial phase of setting up Dovetail Group, the three founders faced the formidable task of laying a solid foundation for their independent asset servicing firm. Armed with a clear vision, they first concentrated on securing the necessary regulatory approvals, which involved meticulous adherence to financial compliance standards to ensure a seamless launch. Establishing a strong capital base was also crucial, for which they reached out to potential investors and leveraged their extensive network within the financial industry. They recognized early on that technology would be their differentiator, so a significant investment was made in developing proprietary systems, including advanced risk management and compliance platforms tailored to the specific needs of asset managers. Equally important was assembling a team of skilled professionals who shared their passion and vision, creating a company culture focused on innovation and client-centric service. These foundational steps were critical in enabling Dovetail to navigate the complexities of the financial market landscape and position themselves as trusted pioneers in independent asset servicing.
 
4.  What makes the Dovetail Compliance Management System (DCMS) stand out in today’s regulatory landscape?

DCMS, a Dovetail proprietary platform, is designed to automate and streamline compliance processes across multiple jurisdictions. It covers fund domicile regulations across 14 global markets, including GIFT IFSC, and undergoes annual reviews by a Big 4 firm for ongoing compliance. This proactive approach mitigates regulatory risks for asset managers while enhancing operational agility. By automating compliance workflows, DCMS reduces manual tracking, standardise the regulatory compliances and offers near to real-time updates to the compliance officers for any regulatory deliverable.
 
5.  How is your real-time risk management platform transforming derivatives clearing for institutional clients?

Our real-time risk management tool is an integral part of our derivative clearing system. It provides institutional investors with real-time visibility into their derivative exposures, helping them make more informed decisions. With features like live margin monitoring, scenario modeling, and automated reporting, clients can proactively manage their collateral levels, stay within regulatory requirements, and mitigate potential market risks. This platform empowers clients with better risk control, ensuring that they can make timely decisions.
 
6.  Dovetail has grown at a nearly 50% CAGR—what factors have been critical to achieving this scale and profitability?

Dovetail is regulated by SEBI (Securities Exchange Board of India) and RBI (Reserve Bank of India) in India and in GIFT by IFSCA (International Financial Services Centres Authority) as fund administrators. Since its inception in 2017, Dovetail Group has grown its client base to over 110+ institutional investors, servicing a combined assets size of more than $3 billion. In just 7 years, Dovetail Group has become one of the leading independent asset servicing firms in India, managing daily transactions worth over $25 bn in notional value for derivative transactions. The firm has achieved a CAGR growth rate of ~50% since launching, reflecting a strong demand for independent asset servicing solutions in an increasingly competitive market. Their role as the first clearing member to settle FPI commodity trades on the MCX further exemplifies their commitment to innovation in financial services.
 
As Dovetail Group secures its stronghold within India, it has set its eyes on expanding into international markets. Recently, the company has been granted a Category 4 license by the Dubai Financial Services Authority (DFSA) to operate within the Dubai International Financial Centre (DIFC). 
 
7.  What strategic importance do markets like Dubai and Singapore hold in your global expansion roadmap?

This strategic expansion marks a significant milestone in Dovetail's mission to provide comprehensive asset servicing solutions to global asset managers. With plans to expand into Singapore too in coming year (with entity already registered), Dovetail aims to increase its global reach, tapping into rising international investment flows into India. Dovetail is already on a trajectory to become a regional powerhouse. This geographic expansion is not just about extending their footprint; it's about capturing new market opportunities and diversifying their service offerings. The expansion into the Singapore and UAE markets represents strategic moves into areas that are pivotal to spreading financial services networks. These regions act as gateways, channeling investments into India and vice versa, aligning perfectly with Dovetail’s mission to facilitate global-to-local financial transactions. 
 
Additionally, Dovetail’s scalable technology architecture allows for seamless integration with international financial systems, making it easier for asset managers to navigate cross-border investments and connect to key markets like India.
 
8.  Dovetail is among the largest fund administrators in GIFT City—what has driven your success in this emerging financial hub?

Dovetail’s early-mover advantage as an ancillary service provider in GIFT IFSC, having best of accounting system (Advent Geneva), largest team of chartered accountants in GIFT IFSC and expertise in registering funds into offshore market for capital raising have made it a preferred partner for MFs, AIFs, and offshore investors setting up India-focused vehicles in GIFT IFSC. Dovetail is also a part of two regulatory committees in GIFT IFSC.
 
9.  How do your capabilities in GIFT City enhance cross-border fund servicing for global and domestic investors alike?

Dovetail’s focus on compliance, enhanced by its DCMS and expertise in fund-level registrations across multiple jurisdictions, such as the USA, U.K., Singapore, and Canada for capital raising, ensures that asset managers can confidently navigate global regulatory landscapes. By offering specialized services tailored to both inbound and outbound investments, Dovetail not only fosters global financial integration but also ensures that Indian and international investors can transact with confidence. Their commitment also extends to services like K1 support, Reg-D filings for the USA, and HMRC filings for the U.K., allowing clients to navigate complex tax regimes seamlessly.
 
10. How are you preparing to meet U.S. regulatory requirements under SEC Regulation D and IRS compliance?

Under the federal securities laws, any offer or sale of a security must either be registered with the SEC (Securities & Exchange Commission) or meet an exemption. Regulation D under the Securities Act provides a number of exemptions from the registration requirements, allowing some companies to offer and sell their securities without having to register the offering with the SEC. 
 
To comply with Regulation D, the Company must file a Form D (Notice of Sales Report) with the SEC within specified time after the first sale of the securities. The Form D will include brief information about the issuer, its management and promoters, and the offering itself. A Form D filing is also required when there is a material change in the information thereafter.
 
In addition to the federal securities laws, every state has its own set of securities laws—commonly referred to as "Blue Sky Laws"—that are designed to protect investors against fraudulent sales practices and activities. While these laws do vary from state to state, most state laws typically require companies making offerings of securities to register their offerings before they can be sold in a particular state, unless a specific state exemption is available.
 
The Schedule K-1 is an Internal Revenue Service (IRS) tax form issued annually for an investment in partnership interests. The tax code in the United States allows the use of certain pass-through taxation, which shifts tax liability from an entity (like a partnership) to the individuals who have an interest in it.
 
Dovetail expertise in registrations of clients’ funds across multiple jurisdictions, such as the USA, U.K., Singapore, and Canada for capital raising, ensures that asset managers can confidently navigate global regulatory landscapes. Their commitment also extends to services like K1 support, Reg-D filings for the USA, and HMRC filings for the U.K., allowing clients to navigate complex tax regimes seamlessly.