SEA Asset Management was founded in 2007. We are part of a group of companies in Singapore. One of our largest shareholders is a Swiss entrepreneur that has a family office here.
We have 2 Luxembourg funds. We have an Asian equity strategy fund and an Asian short duration high yield bond fund. We are currently looking to launch one more fund in the VCC structure.
Besides our funds, we manage money for high net worth individuals. We are an open platform and can onboard any funds under the sun. We invest in 10 third-party funds. Our assets are still 95% discretionary but are working to shift it to a fully discretionary model.
We currently have 4 people in our firm. We might consider adding staff if our asset size increase or if we launch a new product. The advantage of being small is that we are able to make and act on decisions quickly.
How has the independent scene changed in Asia?
There are more M&As as independent firms combine their forces to increase their size. Relationship managers from private banks are also more willing to join an independent firm or to start one themselves as compared to a few years ago. Being with an independent firm, you don’t have to deal with politics and compliance issues. Compliance doesn’t go away but there is so much red tape in private banks now so much so that if you are a relationship manager, you are not going to be able to do your job effectively in a private bank now.
Do you see younger RMs or fund managers coming out to join an independent firm?
The ones that are coming out are more seasoned. When bankers move from bank to bank, their clients have to open a new accounts and go through all the compliance nightmare. Some clients don’t want that, not because their previous bank is a good bank or they like the product or platform, but sometimes they like the brand of a particular bank which makes the clients sticky. Bankers who have clients for many years and held their hands throughout the times can better convince their clients to move the assets out.
What are some expectations bankers should have when they leave a bank for an independent firm?
There could be a potential compensation cut. Some external managers do not even pay a base salary. However, it is possible to earn more at an EAM if they manage to bring their clients over. In a private bank, a banker can carry a lot of deadwood and still sit comfortably there with a high salary. This can be frustrating for people who are entrepreneurial and dynamic who want to achieve something.
If they have an entrepreneurial mindset and the willingness to leave their comfort zone, I would encourage them to do it. Not only is it rewarding, it is a strong proposal for their clients as they can advise and manage their clients’ portfolio in its entirety.
How do you go about selecting your custodian bank?
We work with 7.
We select small to medium sized custodian banks as we currently lack the assets required to work with larger ones. We find that these banks usually have lesser bureaucracy, leaner management, and a shorter decision-making process, and thereby a quicker onboarding process. With a larger private bank, the onboarding may take up to a year. Some relationship managers don’t even survive that long there!
Your worst experience with a custodian bank.
There was a bank who initiated an account closure because the account was too small. The client couldn’t understand why the bank would do that to him after being a client of theirs for so long. Half way through the closing process, the bank tried to stop us because they by then had established a small account team internally. By then, we had already gone to that elderly client to initiate the account closure. We couldn’t suddenly tell him that the bank now wanted him back. It was a very negative experience for the client and us. Naturally we completed the process and moved him to another bank.
The VCC structure is set to be the game changer for the funds industry in Singapore. What are your thoughts on this?
There is no first mover advantage in a mine field. We are not trying to be the first ones to do this. I have built some network with service providers who are involved in the VCC pilot scheme so we are talking to them. We understand that this aims to copy the Cayman fund. It is troublesome to redomicile our current funds to be honest, but the MAS grant scheme has made it compelling for smaller firms like ours to explore the VCC structure as an alternative. For a new fund which we are planning to setup we are likely to use the new VCC structure.
The cost between VCC and Cayman is comparable. We have a Cayman fund that is an unregistered exempt fund because we have a relatively small amount of investors. Now that the OECD is coming down on Cayman in terms of regulations, Cayman has no choice but to agree to their terms. This will drive up the cost of having a Cayman fund since they need to be regulatory compliant. We had a cheaper ride for a long time, but overtime, the cost difference between Cayman and VCC may even out.
I heard that legal fees have jumped by as much as 50% since MAS announced the grant scheme for VCC. When the grant scheme expires in a couple of years and more funds come in here, the traction and momentum will bring the costs down.
What regulations do you think can drive the industry forward?
Regulations that fully discloses its fees to clients. For many years, the private banks have been ripping off customers by hiding their mark-ups. On top of that, they are charging commissions and keeping rebates. This is morally wrong.
Have you ever regretted coming out of the big banks and joining a smaller firm?
When I was in university in Germany in 1990, I was very convinced I would never work for a bank. It was the last thing I wanted. I really did not want to do anything with a bank. By now I have worked with so many banks all over the world now, from San Francisco to Frankfurt. Asia is my calling. I wanted to move to Shanghai initially but ended up coming to Singapore.
I don’t regret leaving the bank because I feel more fulfilled in a smaller firm. It is refreshing. I give my staff flexibility as a boss which you otherwise cannot get in a large bank. In a bank, the scope of decision making is so narrow. If it is an important decision, many people from different departments get involved and nothing gets done. Here, I make the decisions and run it by our shareholders.
Most used application on your phone?
I keep up with the news by reading apps like BBC, Reuters, The New York Times, Bloomberg, South China Morning Post, Financial Times, Wall Street Journal among others.