Guggenheim Investment Advisors
Q. Tell us about the roots of your firm
The Hong Kong office was established by US-based Guggenheim Partners in 2003 when they were ‘looking to integrate other independent asset manager (IAM). Over the years, they have grown into a global financial business group with a lot of in-house products.
We were starting to see conflict between the asset management arm and our independent wealth business. So a year and a half ago, we decided on both ends that there may be a better home for our business and we were acquired by LJ Partnership. The whole group will be rebranded next year as Alvarium Investments.
Q. What’s your business model?
Under the LJ group, we originate real estate deals for families and provide investment management services for the liquid side of client portfolios. Two-thirds of our business is in discretionary accounts and the rest is in advisory.
We also provide trust and administration services, supported by our offices in the UK, Switzerland and Isle of Man, and more recently, merchant banking and corporate advisory services.
Q. Where are your clients from?
The bulk of the Asia business comes from Hong Kong and Southeast Asia-based families.
Q. How big is the team in Hong Kong?
We are a team of 10, five of whom are relationship managers/client advisers and the other five are compliance and back-office staff.
Q. How does the Hong Kong unit work with LJ’s global network?
The Hong Kong unit is part of a global wealth management platform, with offices in London, New York, Miami and Geneva, among others. We work with the group’s other offices on manager selection. It’s a global research effort and we contribute to that.
LJ also has a strong real estate platform and assists us by sourcing real estate deals. Since joining the LJ umbrella, we have brought more co-investment opportunities to our clients. One of our new business initiatives last year was to market real estate co-investment ideas to outside family offices. In line with that, we obtained our Type 1 licence in 2017.
A client once asked me, ‘Do you know of anybody who can help mow the lawn and take care of our overseas property?
Q. Does LJ’s real estate platform have third-party managers?
Yes. Where we don’t have a geographical presence but like a specific theme, we will identify good managers in that space and set up a joint venture with them. They effectively become a platform manager.
Q. What are your clients looking for in real estate investments?
Many clients lack on-the-ground presence or expertise in overseas markets and the LJ real estate platform benefits them because we offer them niche opportunities in Europe. Spain, for instance, was interesting in 2016 because it was one of the last residential markets to catch up with the rest of the world. So there was a market opportunity and we found a manager who can execute residential development strategies.
Q. How do you charge clients?
We charge clients a fixed fee based on a percentage of assets on a quarterly basis. We don’t accept retrocessions.
We generally don’t take performance fees, unless it is client directed because we want to avoid that potential conflict of interest.
Q. How are you advising clients on cryptocurrencies and blockchain?
We are not advising on crypto, but we have some clients who have expressed interest in blockchain. They’ve typically gained exposure in this space through private equity funds that have invested in themes related to generational technology shifts.
Q. What is your growth strategy?
There are a few approaches we’re taking:
- Tapping into different sources of capital for our real estate co-investment opportunities, as shared earlier.
- Hiring RMs from private banks, which is quite challenging in Asia because a lot of bankers are still operating partly on a commission-based model.
- Asset acquisition. We are looking to integrate other IAM businesses seeking a global platform. However, the IAM market in Asia is relatively young having grown more rapidly only over the past five years.
Q. Are there any new markets in Asia that you want to go into?
As a group, we are looking to set up offices in Singapore and Australia.
We also opened an office in New Zealand a year ago as a joint venture with Tailorspace, the investment vehicle of the Ben Gough Family Office.
Q. What new challenges are IAMs facing?
From a business perspective, getting to scale would be the biggest challenge. A lot of IAMs are good at bringing their existing books from the banks when they spin out but you don’t necessarily hear about growth beyond that.
While the fee model is developing, the push towards an all fee-based model is unlikely to happen anytime soon. This makes it challenging for IAMs wanting to be transparent to their clients and get them to pay for a service instead of profiting through commissions.
Q. What regulations you are currently watching?
Firstly, it’s the new code of conduct that comes into play in November, but it won’t have a big impact on our business because we have been quite transparent.
Secondly, we’re watching for updates to the existing anti-money laundering regulations. For us, the impact won’t be as great as we only deal with a limited number of families and we know them well. However, navigating with the custodian banks can still be difficult because there are a lot rules to navigate in order to move money around.
In the past, investments were done through bank custody platforms, so the capital stayed with the bank. As we do more direct investments, there will be an outflow of money from the banks. We get a lot of questions around that, though the money will eventually return to the bank.
Q. What is the most unusual client request you have ever received?
A client once asked me, ‘Do you know of anybody who can help mow the lawn and take care of our overseas property?’