With $2 billion under their belt and targeting $10 billion by 2020, Raffles Family Office is one of the more sophisticated asset managers in the region. finews.asia talks to Founder and CEO Chi Man Kwan.
It would have been a fair assumption that the many myths surrounding family offices in Asia – particularly the one relating to their lack of expertise – would be annoying to the man behind one of them. Instead, Chi Man Kwan, CEO and founder of Raffles Family Office says in an interview with finews.asia, «that’s not a misconception. We are definitely behind the U.S and Europe. The truth is that Asian tycoons don’t have the history of managing their own money like their European peers do.»
The discrepancy applies to all three stakeholders in the industry – clients certainly, but also regulators and financial institutions. «The Securities and Futures Commission (SFC) and Monetary Authority of Singapore (MAS) are making changes to regulation that were already made 10 years ago in Switzerland,» explains Kwan. «UBS in Switzerland has upwards of 400 people in their external asset manager (EAM) team, in Hong Kong you would be hard pressed to find 400 EAM bankers across all of the private banks.»
Not Willing to Pay Management Fees
Much is made about the fee model for asset managers and multi-family offices in Asia, in particular the question of how independent they can be if they accept retrocessions and are rewarded for each transaction the client undertakes. Like most of the industry, Raffles offers clients the option of a flat management fee or a brokerage fee and discloses to clients the rebates and retrocessions it accepts from product manufacturers.
The model, although it works for the industry as long as costs are held low, is led by clients. «Clients in Asia are not willing to pay management fees to an EAM, they would rather pay brokerage,» he says.
No Paperwork and Contracts in Place
Mention that every bank worth its salt is scrambling to service EAM clients in Hong Kong and Singapore and Kwan has a different view.
«This sounds ridiculous but we have been approached by private banks saying they want to grow their EAM business and yet when it comes to signing, they don’t even have the requisite paperwork and contracts in place,» he says, referring to the contract that is standard-issue between EAMs and banks. «I am not talking about second and third tier banks here,» he Chi Man Kwan adds.
Cannibalizing Private Banking Business
Is there an inherent conflict of interest between private banks and EAMs? After all, both rely on wealthy clients for their business. «EAMs and private banks are not competitors,» he insists. «For EAMs to function well they need a private bank – we are more friends than foes.»
Neither does he believe consolidation within the EAM industry, which is already evident, will lead to deals between banks and EAMs. Notwithstanding the recent deal between Schroeders and Singapore-based, Third Rock, he says, «I don’t think banks are going to buy EAMs because they may end up cannibalizing their own private banking business.»
In Six Months $10 Billion?
At $3 billion in assets, Third Rock was not far from Raffles in terms of asset size but Kwan believes he is more likely to buy than be bought. «We are looking at taking over smaller asset managers operating funds between $50 to $200 million in Hong Kong and Singapore,» he says.
The strategy goes some way towards explaining his ambitious growth target. «We aim to have $10 billion in assets by January 2020 and be the biggest in Asia within the next two years,» he says.
