AZ Investment Management Singapore
Q. Tell us about your firm
We are part of an international group called Azimut, which was founded in Italy almost 30 years ago. As a group, we have over $60 billion in assets and more than 85% are in discretionary mandates.
In Singapore, we started out as an asset manager in end 2013 after acquiring Athenaeum Limited, an Asian equity hedge fund firm, and we began our wealth management business at the start of 2017.
Q. How is your head office helping with your Asia business?
We have a dedicated overall group supervisor for risk management, anti-money laundering and compliance functions in our head office who provide support in these areas of the Asia business. Our software systems are also provided by our headquarters.
On the fund management side, we leverage our global team of over 100 colleagues for general strategy and portfolio management.
Q. How big is the investment and frontline team in Asia?
In Singapore, we have a team of 10 relationship managers (RMs) and four portfolio managers (PMs). In Hong Kong, we have five RMs and two PMs. There is a distribution team of 15 people in Taiwan and almost 200 people in Australia. We also have two PMs in China.
Q. Can you tell us more about your business in China?
We have been managing assets in China for a long time. We already have an RMB money market fund and also have an index together with China Securities Index that is essentially a rebalanced version of the main index.
In February this year, we managed to obtain the private fund manager licence, which has only been given to 11 foreign managers to date.
Q. What’s your client base here?
We do not have any European clients. We made a very conscious choice of coming to Singapore not because we wanted to transfer assets from Europe, but because we think this is where the growth is. All the assets are from Asian clients and all our RMs are Asian. As a matter of fact, I am the only European in this office.
Q. How do you charge clients?
We let the client choose their preferred fee structure. There are two main fee models – rebates and management fee. Depending on the client’s preference, there could also be a performance fee. Our clients are evenly split between the rebates and the management fee model here.
While we have in-house funds, allocation to our own products is low. To us, the funds are a means to an end rather than an end itself
Q. What is your business model?
We have a peculiar business model with a stronger focus on internal investment capabilities. Typically, entities will focus on being either a product manufacturer or a distributor but we do both. The disadvantage of this is scalability because to grow, we need to grow both sides of the business at the same time which is not easy. But on the plus side, we are more resilient in terms of the assets under management (AUM) and revenue.
In terms of service offerings, we specialise in investments. If our clients require tax, trust or accounting advice, we have a network of experts in these areas which we can connect them to.
Our aspiration is to become a regional player in Asia as we are in Europe. We have a presence in various Asian countries and if a client has to relocate to Hong Kong or Taiwan and wants their assets booked and managed in these jurisdictions, we will easily be able to accommodate that.
Q. Do you operate on an open architecture platform?
While we have in-house funds, allocation to our own products is low. To us, the funds are a means to an end rather than an end itself. The fund that we have in Luxembourg has over €40 billion in assets and fees are lower as such. This could be more efficient for less active clients.
Most of our clients also end up replicating the main return drivers of our funds as it may makes less sense for them to hold 70 European stocks for instance. Instead, they’ll pick the top 10 stocks of each of our funds. In this sense, they benefit from our expertise even if they are not buying the fund directly.
We also have access to the entire product suite of private banks so we can tap into the expertise of other managers.
Q. How are you advising clients on cryptocurrencies and blockchain?
We tell clients that they have to figure it out themselves or stay outside. The big problem with cryptocurrency is that you can’t custodise it. When you ask an expert, they will tell you that cryptocurrency removes the need for third parties, but in reality, it doesn’t. It makes third parties incompatible with the system, and this creates a problem for user experience in particular in relation to delegating investment choices.
Q. What is your growth strategy?
It’s a mix of organic and inorganic growth. Since February 2017, we’ve hired 10 bankers between HK and SG and we now have a team of 15. We plan to continue this process. We don’t have a target or a limit but the idea is to grow sustainably.
The luxury of having a larger partner backing us also means that we can acquire and we are always on a lookout for the right partner.
Q. Is there a minimum AUM you’re looking at when hiring RMs?
No, it really depends on how the AUM is employed. Some RMs can come in with $100 million in cash. That’s nice because of the potential, but not fantastic. Then there are others with $20-30 million with more active clients and that may be more efficient for a firm.
Q. What precautions are you taking to protect client data?
Almost everything we do is encrypted. For instance, if I create a portfolio for a client, it will not contain any names. In the systems that we use, clients are all coded and the mapping between the clients’ codes and their names are kept in an encrypted vault.
Q. How has the industry changed in the past five years?
There is a lot more professional management and awareness of independent asset management both from bankers and clients. Two years back, most bankers I was speaking to did not understand the business model but today, we’re starting to receive reverse enquiries.
Conversations with clients have also evolved, with a better understanding of the model. Previously, we had to educate potential clients on the entire relationship between us, them and custodian banks. Now, they are asking, ‘How are you different from the three other people I’ve spoken to?’
MAS has also stepped up its efforts in regulating this specific segment of the private wealth industry. This is great because it means a stronger and more mature industry. However, it also means that costs are increasing so there is greater pressure to deliver and to become more professional.
Q. What are new challenges that independent asset managers (IAMs) are facing today?
The biggest risk to us would be a mismanagement of assets by other firms as this would affect the reputation of the entire industry. We think we do a good job and we don’t want our good work to be tarnished by an errant player. Regulations protect us from this.
Q. Do you foresee big tech players being a potential competitor in wealth management?
Perhaps at some point but we think it’s still a people’s business now. Look at airplanes… they are largely automated, but would you jump onto a plane without a pilot?
Q. What are some new regulations you’re watching?
It’ll be important to understand how the accredited investor regime will pan out because that is the condition for our licence. Some changes will require hand holding of our clients so that we can either gently exit those who do not qualify (not that we have many) or redo the Know-Your-Customer checks in advance to be aligned with the new regulations.
It’s also important to understand how the regulations around the funds business in Singapore will evolve. There’s the Singapore Variable Capital Company and the regional fund passporting schemes and this could shift the balance between our asset and wealth management role. If there is a strong fund structure here, then we will channel more resources towards that direction.
There hasn’t been a discussion on the rebates and remuneration model for advisors but I’ll be interested to hear about that.
I also think that there may be a spillover effect from MiFID that will be something to watch for.
Q. What was the turning point in your career when you decide to be part of an IAM?
I tried my luck before getting serious. I set up a hedge fund during the great financial crisis and that was fun. Thereafter, I decided to join an established company as it gives more resources to survive and grow.