Q. Tell us about your firm
ANETO Capital is a Hong Kong-based independent asset manager (IAM) licensed in March 2018. We have type 4 and 9 licences so we can provide advice on securities and asset management services. We have a team of four at this point: two partners and two administrative staff.
Q. How many custodian banks do you work with?
We work with three custodian banks, of which one is most relevant to us.
Q. Where are your clients from?
Our clients are mainly Eurasians – European families who live in Asia, some of which have also developed their wealth in Asia. We also have a strong Thai and Philippine client base. Outside Asia, we have clients from South America and Europe.
Q. How different are South American clients from European or Asian clients?
You need to speak their language, otherwise it is difficult to develop trust. South American families get more value out of working with us because we offer Hong Kong as a booking centre, and this benefits them in two main ways:
1) Geopolitical diversification of their assets. It’s in their best interest to have their wealth parked in various regions that are politically uncorrelated.
2) Investments in Asia via Asia. These clients would rather not invest in Asia through their banks in Switzerland or South America because of limited investment opportunities and a lack of access to on-the-ground expertise.
Q. What is your business model?
We manage client assets and advise them on investments. We also provide clients access to private deals in areas such as real estate, private equity (PE) opportunities or even land and forestry. That said, most of our investments are still in public markets at the moment. We also assist clients with wealth planning and account consolidation.
Robo-advisers could pose a threat because artificial intelligence and algorithms can do our jobs much quicker if programmed correctlySergio Belza
Q. Why forestry, and where do you find opportunities in this space?
Forestry or organic agriculture in general is very interesting. There’s a lot of demand for organic farming. In Asia, there is a lot of pollution so you have high pricing power when you sell organic food that hasn’t been subjected to pollution or chemicals. At the same time, if you were to buy the land used for organic farming, it offers two benefits:
1) Land as an investment that Asians tend to like;
2) Good revenue stream that offers higher yields than a building rental.
We have seen some good opportunities in New Zealand. Though there’s currency risk, yields are higher. Forestry can return 5-6% without leverage, while property rental fetches about 2-3% after tax.
Q. Do you have any in-house funds?
Not at the moment, but we plan on launching a multi-asset fund with a market-timing component. It’ll be invested into equities, bonds and ETFs.
Q. Do you see greater interest in private market investments?
Yes, because apart from the US equity market, public markets have been relatively disappointing in the past few years. Interest rates have been low, bonds have not been performing and there have been cases of bankruptcies in the bond market. As a result, there has been a clear trend towards PE and private deals. However, these are illiquid investments and will be better suited for larger clients with assets above $50 million.
Q. How are you advising clients who are keen on investing in cryptocurrencies and blockchain?
Cryptocurrency is extremely volatile and there is a clear risk of losing your entire capital. For clients interested in this area, we would advise them on the opportunities and risks involved.
We are very positive on blockchain and believe that the technology will benefit the financial sector in know-your-customer (KYC) and anti-money-laundering processes because it allows you to track every penny and where it comes from. With blockchain, information required for KYC can be stored and applied across multiple banks. It reduces the need for high net worth individuals to repeatedly explain their source of wealth whenever they want to open an account with banks.
Unfortunately, it is very difficult to invest in blockchain. I wish there were good opportunities in this space. The ones I’ve been offered so far tend to be too late in the game or everybody has already invested in them.
Q. What is your growth strategy?
We prefer organic growth unless there is a very clear acquisition proposition.
Q. Are you outsourcing any functions?
We partially outsource cybersecurity because it could be a source of risk, and we would rather have it properly handled by experts to ensure everything is well encrypted. The information is also broken down into different computers as an additional security measure. Internally, we also use acronyms to further protect clients’ identity.
We might outsource compliance when we get busier.
Q. Have you introduced any digital initiatives?
We offer digital consolidation of statements but nothing beyond that for now. I am thinking of partnering with a fintech firm that can create an app for us, but am concerned about the cybersecurity issues. Also, we deal with the wealth of large families and there isn’t a need for them to be so connected to their wealth since it’s not money that they will be using every day.
Q. How has the industry changed in the past five years?
The private banking industry has seen more regulation in the past five years, which has restricted bankers’ flexibility in attending to client needs. As a result, we’ve seen more bankers turning towards the independent space.
Q. What are new challenges that IAMs are facing today?
There are two challenges:
1) Regulations are getting very stringent and this adds a lot of administrative burden;
2) Robo-advisers could pose a threat because artificial intelligence and algorithms can do our jobs much quicker if programmed correctly. Quantitative analysis that could take us a whole morning can be done by a robo-adviser in a second. The solution to this is to co-exist with the robots. One way to do so is to explain to clients how robo-advisers work and advise them on which best suits their needs.
Q. What are some new regulations you’re watching?
Firstly, it’s the KYC and source of funds requirements. That’s getting increasingly strict and the SFC is asking for more documentation that can confirm the source of funds.
Secondly, it’ll be the risk profiling of the clients. Investments that are risky for one may not be considered risky for others with a similar profile. We are aware of the differences because we know our clients personally, but the regulators may categorise them in the same risk basket.
Q. What was the turning point in your career when you decides to go it alone?
There is a reason and a trigger. The reason was to provide more independent advice to clients. The trigger was that during a morning meeting with a client he said to me, ‘Go for it and I’ll come with you.’ On the same day, I had a parent-teacher meeting in my son’s school. There were posters hanging all around with one that said: ‘Successful people are not afraid of change.’ I took that as a sign.