Singapore Hedge Funds Club
Evening Reception, 25 Mar 2020
Hong Kong Hedge Funds Club
Evening Reception, 23 Apr 2020
Singapore Hedge Funds Club
Evening Reception, 2 Sep 2020
Sydney Hedge Funds Club
Evening Reception, 8 Sep 2020
Hong Kong Hedge Funds Club
Evening Reception, 5 Nov 2020
Tokyo Hedge Funds Club
16th Annual Year-End Evening Reception, 7 Dec 2020
Shout It Out Loud
Hedge fund industry interviews
In addition to our daily news feed, Hedge Funds Club’s Shout it out loud publishes interviews with interesting hedge fund managers and other senior industry figures that have something to say.
Australian businessman Jamie Wilson had a highly successful accounting practice specialising in HNWIs before he established Cryptoloc Technology. Cryptoloc provides cryptographic technology to ensure users have control over the information they store and transmit. In connection with Cryptoloc’s participation as a sponsor of the recent Hedge Funds Club year-end event in Tokyo, HFC’s Stefan Nilsson had a chat with Jamie.
You launched Cryptoloc Technology in 2010 in Brisbane, Australia. Prior to that, you ran an accounting practice for HNWIs. What made you launch a cybersecurity firm?
It was out of a devastating life event that started me on the journey of cybersecurity. In 2010 I lost my father to pancreatic cancer and the struggle to find his crucial documents such as will, insurance policies and share portfolio. This led me on a search for a secure legacy product and when it didn’t exist, I made the decision to create one. This then led to another search to find data security capable of protecting such valuable documents, which again I did not find, so I began the pursuit of creating that too.
Cryptoloc is focused on data security and cloud storage solutions. Do you think growth is driven by ever-increasing legal and compliance requirements or actual security concerns and threats?
I would say the growth is from the increasing cyber warfare that we are facing today. With data more valuable than oil, people are starting to understand the value of their data and privacy. This drives the increasing legal and compliance demands as they try to keep up and ensure that best practices are being implemented to protect people’s data and privacy.
What are the most important security issues fund managers and investors should be aware of today?
Cyber warfare is only on the increase with data and privacy continues to be in the world’s top five properties. Email has become a convenience that we take for granted, but it is both not secure and also the medium through which many security breaches occur.
Was it easy to put together a world-class tech and business team in Brisbane or did you have to bring in people from elsewhere?
It was not easy as a lot of people thought I was crazy when I wanted to create a virtual vault that only you had access to. It was in 2012 that we first cut code and that was because my first engineer lost his mother suddenly and understood the value of what I wanted to achieve.
Do you feel that it is sometimes hard to bridge the worlds of tech on the one side and business and investment professionals on the other side?
Yes. Why? Because there is so much noise around cybersecurity solutions and large investments that have not been successful in delivering on what was promised. So, when looking for investment, many investors have lost money on other security investments creating a challenge for us to gain their trust.
Is there a cultural mountain to climb or do both sides understand each other and speak the same language?
I don’t believe there is a cultural mountain to climb. I would say it’s a confidence issue.
What makes Cryptoloc different from other security services and solutions available to investors and fund managers?
Cryptoloc stands guard protecting your data when it is stored, in use or during transfer. We do this through encryption technology that puts you in full control of your information. Cryptoloc is an encryption technology solution giving you full control as the owner of the data through a unique patented system that turns each ﬁle you create into three separate encrypted pieces of data which are sorted separately in the cloud.
Interview: Rod Kafer, World Cup-winning rugby player and prime broker, sums up the 2019 Rugby World Cup
The 2019 Rugby World Cup in Japan is over. Rod Kafer, who won the 1999 Rugby World Cup with Australia and then stayed involved with rugby as a coach and TV commentator, is now working with Hedge Funds Club sponsor Invast Global’s prime brokerage team in Sydney. Having attended the Sydney Hedge Funds Club event in September, Kafer then travelled to Japan to cover the World Cup for Fox Sports. HFC’s Stefan Nilsson met up with Rod Kafer in Tokyo during the World Cup and following the final got Kafer to sum up his thoughts about the tournament.
You spent nearly two months here in Japan as a Rugby World Cup TV commentator for Fox Sports. Apart from seeing a lot of rugby, what did you experience during this extended stint in Japan?
Having been to Japan for rugby previously on a few occasions I had a reasonable idea of what to expect. However, what surprised me most, was the passion and support that the Japanese people had for the game and the traditions of the game. To see Japanese couples in the stands wearing opposing teams’ jerseys as supporters and yet managing to sing the national anthems prior to the match for both sides, was something I have never seen before. The willingness of the local community to embrace a foreign sport as in-depth as the people did, truly shows the level of engagement the game garnered over the seven weeks of the tournament. Any visit to Japan would not be complete without a review of the food and drink consumed, and what a culinary experience it was. From the island of Hokkaido enjoying the king crab and my favourite beer ever tasted – The Sapporo Classic, it’s so good that it is only available in Sapporo and not exported off the Island; or heart-warming ramen after onsen in the south in Oita on Kyushu; to any of the various dishes on offer in Tokyo, the food was never a disappointment and I enjoyed every meal. Former Japan and Suntory coach Keisuke Sawaki took me for a feast at a favourite sushi restaurant in Gonpachi, and it is hard to put into words how magnificent the food was, washed down with a Suntory Malt Beer, of course, then followed with a Roku gin and tonic, a drink that Eddie Jones was advertising – was some experience on a number of different levels.
Host nation Japan, for the very first time, went through the group stages unbeaten – including great victories over Ireland and Scotland – and made it to the quarter-finals where South Africa proved too tough. Was Japan’s Brave Blossoms’ success a surprise to you?
Every Rugby World Cup has produced teams that have surprised – Japan has now done it twice! I recall seeing Japan play in 1987 prior to the Rugby World Cup and losing to New Zealand by over 100 points, to see them play in 2015 as they did and so narrowly miss the quarter-finals was a shame and suspected they had the ability to improve whilst playing at home. However defeating Ireland this time, a team who had only weeks before been the number one team in the world, was breathtaking; then to back it up over Scotland – who they failed to beat in 2015, proved they not only have the courage but the tactics, the skills and the playing depth, to be a team who could be a top 8 team in the world in the near future. Losing in a quarter-final to the eventual winners of the tournament, in a game where the Springboks had to revert to a style of play designed to bludgeon Japan, fearing they did not have the skills to match Japan head-on, reflects how far the team has come and was a sign of respect the Brave Blossoms had amassed in only a matter of weeks. They truly shocked the rugby world.
Japan’s playing style, which includes some stunning running rugby, is rather different from the more rough-and-tough rugby of some teams with taller and bigger players. Do you think that Japan’s relative success with its playing style may influence other emerging national teams?
Underestimating the work and effort that the Japanese team put into their preparation for the Rugby World Cup would be an error and easy to overlook, and therefore easy to think they produced a playing style that others could easily replicate. It might appear easy to duplicate, but it’s difficult to perfect a style of play, in the way that the Brave Blossoms did, without the time and commitment to be exceptional at your craft. Japan was expertly coached, over a four-year period, by Jamie Joseph – the former All Black and Brave Blossom player; and Tony Brown, both who have had extensive coaching experience in Japan, and therefore understand the local culture well enough to design strategy to suit their players. What was exceptional about Japan’s play, was the high level of skill that the players showed under pressure in all aspects of the game. Their play evolved into a complete game with few weaknesses and a belief and understanding of their strengths and weaknesses, that opposition teams found difficult to counter. They managed their playing resources in such a way as to get the absolute maximum out of the team they had. They innovated in areas where they were at a disadvantage and then capitalised in the areas where they were better than their opposition. Catching Ireland on a hot, humid night in Shizuoka certainly helped the supremely fit and lighter weight forward pack where team selection from Jamie Joseph played a role in dealing with the conditions on the day, in a game where Japan excelled, and were worthy winners.
What do you think the success of Japan as a Rugby World Cup host nation will mean for rugby’s future?
The great challenge for Japan rugby and indeed world rugby is to build a legacy that lasts for generations. It was obvious that the Japanese population embraced the game and the tournament. With the success that Japan had, the opportunity exists to promote the game in a way to garner the hearts and minds of the population. Focusing on a grassroots, ground-up approach within schools, with the appropriate level of investment, could deliver a game and a supporter base that will eventually sustain a truly professional competition to augment and capitalise on the existing company-based top league.
Aussie Eddie Jones, a former coach of both Australia and Japan, did rather well at this World Cup, taking England all the way to the final. Do you reckon he should soon come home to Australia and take charge of the Wallabies to bring them back to glory?
Eddie is a world-class coach and has demonstrated that over many years, in a variety of environments, in a variety of roles. Unfortunately, Eddie is contracted with England and therefore not an option to coach the Wallabies. I am encouraged however by the recent appointment of Dave Rennie to the Wallabies. Dave is an excellent coach with a fantastic pedigree and a proven history of success. I am looking forward to seeing him continue that in Wallaby Gold.
South Africa are the new world champions of rugby. Did you expect them to do this well prior to the Rugby World Cup starting?
Yes, I did. I had predicted the final prior to the tournament, however, had England winning over South Africa, so got that wrong! South Africa had all the elements needed to perform well in a World Cup, and as is often the way, did not have to beat the best team in the world, as England did it for them in the epic semi-final. South Africa was able to preserve the most amount of energy in the group stages adopting a conservative game plan that allowed them to play the final at a pace that England was unable to compete with. They were excellently prepared and peaked for the final to perfection. The return of Cheslin Kolbe was a major boost for the psyche of the team and his try late in the match showed the quality of the world-class finisher. The Springboks were worthy three-time champions.
Your fellow Fox Sports commentator is Tim Horan, a two-time World Cup winner with the Wallabies. Is there a bit of rivalry between the two of you in the studio or are you just good mates supporting each other?
I am fortunate to work with some of the greatest players in Wallaby history – not just Horan, but Gregan, Kearns, Martin, Hoiles, Harrison and Mitchell – they make a pretty formidable line up of talent. Whilst not all of us have played directly with each other, we all cross over in a way that everyone has played with at least two others on the list and therefore we have, what Justin Harrison likes to refer to as a “golden thread” running through us. We are all great mates and enjoy one another’s company.
You and several other former rugby stars have made the transition into successful business careers. Is it the competitive instincts and winner mentality that help some former rugby players succeed in business?
One of the great challenges as a former player, is you have a career in rugby until sometime in your mid-30s, if you are lucky, and may have had some great highs, and certainly some lows as well, and then often transition into a completely new industry, which may have little applicability to your time in the game. Whilst you have garnered certain skills during your playing career, you have also missed many of the lessons that you would have learnt had you followed a more traditional business or career path through your 20s and 30s. After the game, you can find yourself as a rookie in a new industry at the age of 35, 40, or sometimes 47, as I have, and need to learn and adapt as quickly as you can to be successful. I think one of the greatest challenges for ex-sportspeople, is trying to replicate the enjoyment you had as a player, playing the game you loved, in a new environment that is not as fulfilling as playing a sport for a living. I think the competitive instincts that sportspeople have are often specific to the sport they play, and at times do not translate outside of that world. Certainly, in business I have met incredibly focused and competitive people equal to any of the great rugby players’ competitive instincts, however, sportspeople are typically able to bring a work ethic and sense of teamwork that most businesses value. For many sportspeople, the measure of success in business probably has more to do with their ability to find joy in their new career. I have been involved in several businesses since finishing as a player. I have founded and sold a couple of businesses and had success and failure in business as in life. However, my time at Invast Global has been immensely enjoyable and incredibly rewarding. I consider that to be an outstanding success and look forward to it continuing.
In Australia, HFC’s Stefan Nilsson stumbled upon a portfolio manager who is also a pastry chef. Stefan couldn’t resist having a chat with Pauline Chrystal, portfolio manager at Kapstream Capital in Sydney, about her somewhat unusual parallel career in investment management and French pastry.
How did you in the middle of a successful career in finance and investments decide to become a pastry chef and launch your French pastry business by Pauline?
I had worked in finance in France, Hong Kong and Singapore for close to nine years, going through the global financial crisis and very unstable markets, both financial and job markets, with rounds of cost-cutting and headcount reductions making headlines too often. At that time, my husband who is from Sydney wanted to relocate from Singapore to Australia and I saw it as a good opportunity to take a career break.
You have a CFA and an MSc from HEC School of Management, but also a certificate in patisserie from the Le Cordon Bleu Australia-Sydney. Are official qualifications as important in the pastry world as they are in the world of finance?
In any field, I believe experience and hard work always shine through. However, a qualification is a good way to gain credibility when you get started in a field.
Your firm By Pauline specialises in modern and delicate French pastries, breaking away from the traditional sponge and buttercream cakes. Are you on a mission to abolish sponge and buttercream cakes?
Not abolish but give another more modern option, which caters beautifully to current trends from dietary requirements to social media.
How creative are you when it comes to creating pastry? Do you stick to the French traditions or are you adding some Aussie flair to your offering?
I go with new techniques but try to use local ingredients to the extent possible
From a time-perspective, how do you juggle the two different roles?
I’ve put By Pauline on hold for now. The business was positioned as an artisan handmade pastry catering business. In order to be able to pursue it, I needed to give it full attention, as well as pouring in a significant financial and time investment into hiring and training staff as well as a custom-fitted commercial kitchen. Therefore, I have scaled pastry down to a hobby and am fully focusing back on my PM role.
Are you as passionate about finance as you are about pastry?
Both are fulfilling from a different perspective. Finance definitely has less room for creativity but is very intellectually stimulating. Pastry involves hard labour but the end result is more personally rewarding than seeing one of the companies I cover release solid earnings!
HFC’s Stefan Nilsson had a chat with Grace Reyes, the ebullient head of The Association of Asian American Investment Managers (AAAIM), about the importance of diversity, social media and networking.
Tell us about The Association of Asian American Investment Managers (AAAIM) and its mission.
AAAIM is a non-profit organisation promoting ethnic and gender diversity within the investment industry. An official partner to the largest US public pension plans’ emerging manager, diversity and inclusion efforts, AAAIM’s alliance of prominent, successful Asian American leaders includes an expansive network of seasoned and rising investment managers that handle over one trillion in assets under management. AAAIM’s network provides a forum for professionals in the industry to meet, network and create business opportunities. This network continues to grow as AAAIM further engages more people and raises awareness of the organisation and the importance of their mission internationally.
You have a background in alternative investments and finance. How did you end up taking a role leading an industry association?
Prior to AAAIM, I spent time as the Head of Investor Relations & Fundraising at The Reliant Group, a real estate private equity firm with US$2bn in assets under management. I also worked on the corporate and business development team at Switchfly, a travel-tech firm, reporting to the executive suite. What was consistent however across all of my roles was the value of the close rapport I have formed with an array of industry leaders and prominent investors. When the opportunity to lead AAAIM appeared, I realised how valuable those relationships could be to this kind of organisation, as we grow AAAIM’s reach, value and awareness. Being able to share AAAIM’s mission with some of the industry’s best-known investors has been important to our growth as an organisation. I love that I’m able to pull on an important skill set of mine to fuel AAAIM’s future while promoting a mission of gender and ethnic diversity – one that I could not be prouder to represent!
When it comes to diversity and inclusion, do you see any dangers that some firms and people are just talking about it to look good rather than actually trying to build organisations that will benefit from proper diversity?
It’s easy to distinguish the organisations that are truly implementing diversity – those are the organisations that are championing the cause through action and not just furthering a message of diversity. I think it’s an important reminder that leadership take an active role in incorporating the change they are seeking through their own actions.
You are frequently socialising at industry events and you are also very active with social media. Is it part of your strategy to get AAAIM noticed or is it just the way you are?
I am social by nature! On the side, I’m also the Founder and Co-Host of goodtimesSF, San Francisco’s largest investment networking happy hour. I absolutely love meeting, networking and getting to know diverse individuals across our field. I also believe that being vocal about what we do at AAAIM is critical to our success. It’s important that people know who we are and what we represent. LinkedIn has been a natural venue to spread AAAIM’s message further through my own activity on this channel. It has been a great tool to reach new and greater audiences.
You founded investment-industry drinking club goodtimesSF a decade ago. What made you take that initiative?
As the head of fundraising for a private equity group, I was always out networking and wanted to find a more efficient way to connect with industry leaders and investors without having to go out every night. I decided to host happy hour events to bring people together and called it goodtimesSF because I think networking should be something fun! The group took off and grew to become the largest investment happy hour in San Francisco. Co-hosting these events connected me to some amazing individuals that have been pivotal to my career.
If you hadn’t worked in the investment industry, what would you have been doing as a career?
I grew up from humble beginnings and remember watching “Pretty Woman” in my youth. I was fascinated with Richard Gere’s career. It was my first exposure to how private equity works and from that point, I knew from this young age that I wanted to work in finance! This makes it hard to think of any other career path. But as I have been travelling all over the world, I wouldn’t mind being a professional jet-setter – is there such a role that exists?
HFC’s Stefan Nilsson caught up with Spark Plus’ Daniel Rootes in Australia ahead of the first Sydney Hedge Funds Club event which will take place on 10th September. Spark Plus provides listed companies access to accredited investors across the Asia Pacific region.
Spark Plus opened its first Australian office last year. How is it going so far?
It has been great. We have been very busy marketing the services to local corporates. We are based in Nedlands, Perth. We share an office with JP Equity and also have Tim Young who represents us out of Melbourne for East Coast exposure.
Have you seen good uptake on your service of bringing listed Australian companies to meet with hedge funds and other investors in Asia?
The Australian office has been looking to take quality companies to Asia to ensure investors that there is plenty of upside if they do choose to invest. To date, I have worked with approximately 12 corporates and the second half of the year looks promising as well.
Are you also looking at bringing non-Australian corporates to meet funds and investors in Australia?
This is something we can do if they are looking to list on the ASX. This would be through the assistance of JP Equity Partners.
Your Australian office is in Perth which is relatively close to your headquarters in Singapore. However, it is rather far away from Sydney and Melbourne. Is that an issue or is it easy to cover all of Australia from your current location?
We have Tim Young based in Melbourne with 20 years’ experience in institutional sales in Hong Kong. I am also originally from Country NSW and lived in Sydney for eight years, so I get to Sydney every, or every second, month. It’s not really an issue as the ASX community is quite small and there is always a range of events in which we can attend to catch up with corporates.
Have you been focused on specific sectors or have you seen companies from many different industries doing non-deal investor roadshows into Asia?
I have focused on particular themes to suit investor demand but at the same time working with a diverse range of clients. Themes include healthcare medical technology, financial technology, gold, salt and potash and waste-water management. We certainly do not want to be seen promoting three similar stocks at any given time as investment results differ. However, Spark Plus do run sector-focused investor days in both Singapore and Hong Kong which receive big traction.
What has been the biggest challenge with launching Spark Plus in Australia?
I guess the biggest challenge is educating companies on the types of investors in the Spark Plus network. The biggest point of difference is that we profile the investors to ensure companies they are speaking with the right people for potential investment. At times companies expect investment straight away which may not be the case. But if we can market the company to family offices and hedge funds and the company delivers on their goals and objectives, they have eyeballs on the company and could well see sizeable investments on the market.
Spark Plus is one of the event sponsors of the first-ever Sydney Hedge Funds Club event which will take place on 10th September. What’s brewing in the Australian hedge fund industry?
Good question. I think with the XJO (ASX 200) having recently hit all-time highs, the Australian hedge funds are keeping a close eye on the trade war outcomes. I will certainly be looking to chat with some of the funds around the gold sector as we are seeing record gold prices as well.
For more information on Spark Plus, please visit: www.sparkplus.org
The Hedge Funds Club had a chat with Roeland Pot, Managing Director of Flow Traders in Hong Kong about the derivatives markets, changing regulations and new business opportunities. In partnership with Eurex.
How has the MSCI derivatives market (transition from swaps to futures) changed in recent years and what is your outlook for the near future? Are there any growth drivers?
Increased regulatory scrutiny over recent years has led to larger capital constraints for investors as well as an increased need for transparency. This has resulted in a significantly larger uptake of regulated, listed and centrally cleared instruments and thus caused investors to move away from swaps and into futures. Flow Traders expects these trends to continue the following years. With regards to the MSCI derivatives market specifically, we’ve seen a major increase in open interest and turnover both off-screen as well as on-screen, leading to tighter bid-offer spreads and therefore reducing costs for investors significantly.
How is Flow Traders poised to capture this growth?
As a technology company operating in financial markets, we use our proprietary technology platform to provide liquidity in thousands of regulated, listed instruments and are therefore well positioned to capture expected future growth. We also provide liquidity to institutional counterparties off-exchange across the globe, such as pricing blocks in MSCI futures. Market participants benefit from higher execution quality and lower overall trading costs, while the markets benefit from greater efficiency and more transparency.
Will listed MSCI Futures become even more relevant for the buy side due to the next chapter of Uncleared Margin Requirements (UMR) regulations coming September 2019?
This indeed is to be expected. In response to the global financial crisis of 2008-2009, the G20 agreed to a financial regulatory reform agenda covering the over-the-counter derivatives markets and market participants. Among these reforms were recommendations for the implementation of margin requirements for non-centrally cleared derivatives. The final phases of UMR will occur on September 2019 and 2020, when a large number of additional counterparties will be in scope for posting initial margins on their non-centrally cleared OTC derivative positions. As of that moment, initial margins on centrally cleared derivatives, such as MSCI futures, will be significantly lower vs non-centrally cleared OTC derivative positions. These regulations are therefore meant to incentivise investors to further move away from OTC derivatives and into centrally cleared instruments, such as MSCI Futures.
What are, in your opinion, the main strengths of the Eurex MSCI derivatives offering?
MSCI indices are some of the world’s most widely tracked benchmarks, with more than US$12 trillion linked to them. Eurex offers a comprehensive suite of futures; 117 MSCI futures are available, covering Emerging Markets (EM) and Developed Markets (DM) in different index types (NTR, GTR and price indexes) and different currencies (EUR, USD, GBP, JPY), which are all tradeable for over 20 hours a day. This large offering helps fund managers as well as other investors facilitating in- and outflows of funds, hedge existing equity exposure and enhance portfolio performance. Flow Traders is the leading liquidity provider for Eurex in market making the full suite of products on screen as well as directly to counterparties, by providing competitive quotes on blocks upon request. For more information on Flow Traders and Institutional Trading please refer to our website: www.flowtraders.com
Interview: Gavin White, CEO, Invast Global / “We are committed to contributing to the growth of the hedge fund industry”
HFC’s Stefan Nilsson decided to have a chat with Invast Global’s CEO Gavin White about Invast’s expanding multi-asset prime brokerage business.
Asia-Pacific is in your DNA: Invast Global is headquartered in Sydney, your parent company is headquartered in Tokyo and you have recently opened an office in Hong Kong. How important is Asia-Pacific to your business?
Yes – our parent company has been a licensed financial services firm for over 60 years in Japan, so we have a long-standing affinity with the Asia-Pacific region. Having said that, our reach is truly global and our revenues are generated broadly across the world. We expect the Asia-Pacific region to be a big driver of our growth over the next 3-5 years. Hong Kong and Singapore have long been jurisdictions with strong asset management industries. There is a distinct entrepreneurial streak inherent in the culture of residents of both cities. With regard to the hedge fund industry, this translates into a healthy start-up and emerging manager scene. We intend to continue making a big commitment to serve this segment.
Do you mainly target existing hedge funds looking to switch prime brokers or are you more focused on signing up brand new fund launches?
Traditionally we have focused on serving the needs of the start-up and small/emerging managers. These are managers who have had a difficult time meeting the demands of the big bank PBs with minimum commission hurdles, etc. The bank PBs are being deeply affected by tightening regulatory regimes, particularly the Basel and MiFID regimes, which look to be with us for the foreseeable future. We focus on the specific needs of this end of the industry and our flexibility and non-bank status allows us to be more innovative toward this segment than the bank PBs can be. It is a real privilege to step into this space as the big bank PBs depart. Without a strong start-up and emerging manager segment, the future of the asset management industry is at threat. After all, the start-ups and emerging managers are the industry heavyweights of the future. We like to think we are playing our part in promoting a healthy, sustainable industry by helping nurture the smaller end. Having said that, demand from medium to larger managers has surprised us. It shows that the big bank PBs are undergoing significant restructuring programs, which is having the effect of ratcheting higher the requirements managers need to meet before being accepted onto the big PB platforms.
What do you think makes Invast Global’s offering stand out in a crowded prime brokerage market?
This is quite simple – we’re “high-touch” in the aspects of our client’s business where they want us to be, and “low-touch” in the areas that everyone finds painful. We’ve worked incredibly hard to ensure that our documentation, onboarding, KYC and DD processes are as efficient and automated as possible. But if a client calls up our coverage team at any time of the day or night, that call gets answered immediately by someone knowledgeable and professional who will make sure the client gets what they want, quickly and without fuss. We are committed to contributing to the growth of the hedge fund industry by nurturing the smaller end of the spectrum. We offer very competitive fees, with no monthly minimum commissions – something that is appreciated by our smaller fund clients. We have a specialist team of prime services experts who support the multi-asset needs of our clients – there is no transferring between prime services teams who are segregated along asset class lines. Clients can trade a broad range of OTC instruments, as well as a global suite of exchange-traded instruments, all from the one account and one collateral wallet. Stock borrow is one of our strengths, due mainly to the fact that we enjoy equity PB relationships with two of the largest PBs on the street, complemented by strong borrow relationships with other players. Overall though, we get most feedback about the quality of our client service. Every client is crucially important to us and we treat them all accordingly. We thrive on coming up with simple solutions to our clients’ complex needs. Every client is different, and we aim to adjust our offering in response to the specific needs of each client.
In addition to your vast experience as a broker, you have also worked for a global macro hedge fund. How important do you think that experience is for you in order to better understand and serve your hedge fund clients in your current role?
Yes – I have an intimate understanding of what it takes to get a fund up and running. It is not easy – especially if you are small and have limited staff numbers. The assistance you receive from vendors and service providers is crucial – mainly because your own internal resources are generally stretched pretty thin. The unfortunate fact is that the end of the market that needs the bespoke, flexible support, is precisely the end of the market that the big PBs are pulling away from. Start-up and emerging managers are often caught in this trap. There is a palpable sense of relief amongst many of the clients we onboard, when they realise the quality and breadth of our offering – and particularly how we have streamlined the onboarding process and devote resources to take the workload off the client. Most of our clients had been expecting to migrate to a retail broker upon being offboarded by their bank PB. They are pleasantly surprised to find that there is an offering like ours which is world-class, institutional quality, but at a reasonable price point and all-encompassing for their needs. We collaborate directly with our clients’ administrators and custodians to ensure processes are completed with the minimum disruption to the manager themselves.
Have you seen any change in recent years regarding what hedge funds and other clients in the Asia-Pacific region demand from their prime brokers?
A strong theme has been a growing demand for outsourced execution, which we have been providing for clients on a 24-hour basis for a few years now. We have begun developing bespoke execution algorithms to really give clients “remote control” of their executions. This is backed up by a highly skilled manual execution team operating around the clock.
You are a founding sponsor of the Hedge Funds Club’s expansion into Australia this year. What’s brewing in the Australian hedge fund industry?
We are very excited that the Hedge Funds Club is coming to our home town. We have had a long association with the HFC events and it has been a very valuable relationship for us, in many ways.
There has been a lot of movement in the asset management space in Australia and we believe there is great potential for the industry to grow strongly as a centre providing world-class asset management with particular expertise in the Asia-Pacific, a part of the world experiencing continued strong economic and demographic growth. We want to help fund managers get established down here and assist them in showing the rest of the world the quality of Asia-Pac managers. Partnering with the Hedge Funds Club to generate interest in Asia-Pac managers seems like a great idea to us.
HFC’s Stefan Nilsson caught up with Gerben Oldekamp of Circle Partners in Singapore to discuss the group’s fund administration offering and its growing client base in Asia.
As a global fund administrator – how important is Asia to your business?
Until a little over a year ago, we did not have a presence in Asia. We had offices in the US, the Caribbean and in Europe and always thought Asia would be a great next step. It took us a while to take the plunge but we don’t have any regrets that we finally did. We have experienced massive growth due to our strategic plan and timing to enter the market. Both the turmoil in the fund administration landscape as well as a large number of new initiatives, have contributed to this.
Do you mainly onboard existing funds that want a different fund administrator or emerging fund managers at the pre-launch stage?
Both. Although we onboard quite a few emerging managers, we have a very diversified client portfolio. Especially here in Asia, we have onboarded quite a few existing funds as it seems that all the changes have led to some of our competitors struggling to keep up service levels. In the space we are active in, mid-sized fund administrator with AUA over 10 billion, I believe we are one of the few, if not the only one, still independently standing and I believe we have profited from this.
You personally have a background as a lawyer. How helpful is that when you work on fund administration and fund structuring?
It has added a tremendous amount of value, especially when talking about fund structuring. I have for many years been involved in setting up funds and structures. Being a director of fund structures in Europe, this experience has taught me to be creative and has given me a good network of resources to consult when I don’t have the right answers, which prospective clients appreciate. I have furthermore been involved with Circle Partners for more than 10 years now and, because of this, have added knowledge and experience in accounting, investment strategies, etc. which is helpful too.
How have fund managers’ needs changed in recent times in your experience?
In my experience, regulation and enhanced compliance requirements have made it at times quite complicated and overwhelming to launch. More than before, we try to be transparent and complete in the advice we give on setting up. We also try to be realistic in terms of time to market. To answer your question, more than before, managers need to be guided and hands need to be held.
We have seen a lot of consolidation in fund administration in recent years. How can independent fund administrators compete with fund admins that are part of banks and other broader financial services groups?
I see it as a tremendous advantage that we remain independent. Senior leadership, including myself, are very much on top and very concerned with service levels while at the same time being competitive on price. With an organization of just over a hundred people, we are nimble, timely and highly responsive. I furthermore think it is an advantage to be service-provider agnostic. Our clients are free to use any broker/custodian, platform, etc. This independence has proven to be very effective.
You have two local offices here in Asia. Is it vital to have a regional presence in order to win business and serve your clients properly?
Absolutely. During the time we were only active in Europe and the US, we would occasionally win some Asian business. We, however, often received feedback that not being able to offer the same time zone reporting and not offering Mandarin speakers was a reason to choose another service provider. With our office in Singapore, we now offer the above and we could have never experienced the growth we have experienced without it. We will now place people in our Hong Kong office, which has always been more of a representative office, as we have noticed that in order to further grow in both Hong Kong and China this is necessary as people like to meet and call people locally.
HFC’s Stefan Nilsson checked in with Omar Taheri in Singapore to talk about Spark Plus’s expansion into Australia. Spark Plus provides listed companies access to accredited investors across the Asia Pacific region.
Having already established yourself with operations in Singapore and Hong Kong, you recently opened an office in Perth, Australia. Was Australia the obvious next step for Spark Plus?
Given that most of our clients are ASX listed, we thought it was a good idea to have our operations and sales team built in Australia. One really has to be close to the capital markets and be on the ground to be able to grow one’s businesses. We knew that travelling back and forth was not sustainable in the long run so we hired Mr Daniel Rootes to head up our Perth operations and grow the business.
Is the new office focused on hosting roadshows and events in Australia or is it more focused on marketing your Asian capabilities to listed companies in Australia? Or both?
The current offering is to take Australian companies to connect them with Asian investors on a non-deal roadshow basis. However, we are thinking to expand the offering to also have Australia as a roadshow leg for non-Australian corporates.
Perth is a city known for companies in the mining, petroleum and agricultural services. Was this a major factor in the decision to locate your Australian office in Perth?
The main reason we chose Perth as our first office is due to the same time zone, proximity, and our client base. We have a lot of firms coming from Perth given that it only takes five hours to get up to Singapore which is nearly the same as flying from Perth to Sydney. We realised that Perth for its population had a lot of entrepreneurs and a broker network that is very supportive of taking companies up to Asia.
In Asia, you have recently been active in sectors such as natural resources and healthcare. What are the hot sectors for Spark Plus in 2019?
We are actively looking for industries that are disrupting the status quo. We are quite bullish on the e-sports segment. The interest coming from large brands, sponsorship, tournament prize pool and viewership in this space is getting us excited. There are only a few companies listed in this space currently so we are hoping this trend will change as the industry matures. I highly recommend your readers to check out an e-sports event to understand the magnitude of the industry and how some of the major stadiums in the world are now getting filled with a whole new sub-sector of fans and followers. The other sector that we are looking at is the aircraft leasing sector. We do tend to find that this industry has great potential and yield. We constantly see rise in passenger numbers and a rising middle class in Asia, so hence we realise that airlines will need to purchase more planes and lessors will benefit greatly from this.
Spark Plus is providing independent corporate access, something which was earlier done by banks and brokers. Do you see any potential in partnering with banks and brokers to provide your service or do you see Spark Plus continuing to operate independently?
Currently, we do work with niche brokers to give them access to our Asian investor base. However, the larger investment banks already have this space covered given that they have an office in all major financial cities. We have had plenty of success with brokers that don’t have a presence in Asia but are looking to get connected to our buyside. We are also actively signing MOUs with new partners in Japan, China and the UK, which will allow us to mutually benefit each other’s organisation.
LightStream Research was founded in 2017 with the goal of melding traditional research with alternative data and artificial intelligence to provide deeper insights into companies, industries and economic conditions. HFC’s Stefan Nilsson checked in with LightStream Research founder Mio Kato in Tokyo to find out more.
You launched LightStream Research in 2017. What led you to set up your own business?
I think it was mostly a desire to be able to focus my time on things which seemed useful and were simultaneously enjoyable to me. Equity analysis is simply something I enjoy doing and my education also heavily focused on mathematics, economics and econometrics, so the new big data and alternative data wave seemed like it was right up my alley. My time as part of company management at the firm Uzabase also made me realise that I like developing and training talented juniors. Lastly, I believe there is a significant advantage in being able to tap the lower wages and financial skills of labour on the Indian subcontinent but there is some rigidity of contract terms and high fixed costs for traditional KPOs. The confluence of these three factors made me believe that there was scope to develop a small team of talented juniors in Sri Lanka to emphasise data-driven research and flexibly provide investors with analytical help, both through standard research notes and bespoke research.
LightStream is part of a wider group of related companies that cooperate on different levels. What advantages does this set up give you over some of your competitors?
We partner with Nowcast under the umbrella of the Finatext group. Nowcast is Japan’s foremost alternative data provider and together with Sandalwood one of the few go-to companies for alternative data in Asia. We sit in the same office as Nowcast and collaborate with them extensively so we have access to a variety of credit card, point-of-sales and point card data. Naturally, this gives us some unique insights about various consumer product and ecommerce trends which are important to investors, but the longer-term picture is really about combining the skills of equity analysts and data scientists to convert very interesting data into accurate alert mechanisms to highlight investment ideas and also help build real conviction. To this end, we started an initiative to have all our equity analysts trained in Python programming, not just for the purpose of web scraping and data crunching but also to try and understand the way our Nowcast colleagues come at a problem. That deepening of collaboration will be a key determinant of generating the most actionable and high conviction insights in my opinion. We also publish our research on the Smartkarma platform. While we have no capital ties with them, we know the founders well and have a strong regard for the direction they are trying to push investment research in. It is early days for these online research portals, but there are a number of extremely experienced and capable analysts on the platform whose expertise we can tap. We are all about collaboration and trying to understand as many different perspectives on a potential investment as possible so we are very focused on trying to generate conviction on investment ideas by passing them through multiple filters – alternative data, traditional fundamental analysis, the perspective of industry experts outside of the investment world.
Your business and your research analysts are split between Tokyo and Sri Lanka. What was the thinking behind this set-up?
Mainly cost and the ability to provide an attractive opportunity to talent in Sri Lanka which is interested in cutting-edge analysis. Many KPOs focus on the cost advantage of analysts in Sri Lanka or India, but from my perspective what is more important is the ability to select the very cream of the crop when you don’t have to stress over budget. Conceptually, rather than trying to hire good analysts for a fraction of the cost, we want to hire the very best analysts in Sri Lanka for what is by Tokyo standards an extremely reasonable cost, but quite generous pay by Sri Lankan standards. We believe this better maximises the cost/benefit ratio. Also, I am half Japanese and half Sri Lankan and I grew up in Sri Lanka so I have an interest in trying to provide talented Sri Lankans with similar opportunities to what I was luckily afforded in my career. The cost advantage does, however, have important implications for the scope of what you are able to do. For example, with our Nowcast collaboration, developing entirely new methods of analysis and combining data analysis with the understanding of company business models and operating leverage is time-consuming. It would not be easy to make the necessary investments for this process if you were to hire only Japanese analysts, but by creating mixed teams it is much easier to obtain the manpower while still ensuring an understanding of the local dynamics.
You have a focus on Asian research rather than global. What made you decide on a regional focus?
Well, my own experience is in Japan where I have been analysing stocks since 2004. I also see a lot of positive developments in the Japanese market and among Japanese businesses so given the gradual migration of analyst talent over the last decade plus I do not consider this a bad time to be focusing on Japan. For Asia more broadly, we largely focus on three areas: 1) industrials, where China is often the marginal demand driver and where Japanese companies are particularly strong, 2) tech where Asia is often a key source of demand and very dominant in the supply chain, and 3) consumer products and retail, mainly focused on Japan where we most heavily utilise data from Nowcast. Since a lot of incremental global growth comes from Asia and we believe that Japan’s companies are not just healthier balance sheet-wise but also increasingly successful at expanding in Asia, and profitably no less, we believe that the key swing factors which drive performance will be frequently located in Asia.
Data and artificial intelligence are all the rage now. How are the data revolution and changes in how data is collected, analysed and used impacting your business?
It certainly feels like the future. On a personal basis, I think that the increasing abundance of data as people start to understand its true value could eventually lead to a greater emphasis on long-term success and strategy as alpha becomes harder to generate purely from data sets, therefore we are not by any means de-emphasising the importance of company strategy and qualitative analysis. With that said, in the medium term, we believe data analytics could become a very strong generator of alpha. In particular, we believe effective forms of data cleansing, which Nowcast is expert in, and generating high signal-to-noise ratios will be key. With that said, data quality is an issue throughout the industry and making effective use of a lot of the data coming through is not easy. At present data collection and tagging is not done well by all generators of data and improving this will be a process. Once that can be done it is a matter of integrating the much more granular and high-frequency data into financial models to parse the impact on company earnings. We are also quite fond of very traditional numerical analysis such as correlation analysis and doing specific factor analysis of company earnings. It is simple, but often effective and now we have even more data to play with. Manipulating and combining data in appropriate ways to generate investment insights also requires a certain amount of understanding of finance and equity analysis which many data scientists lack. Thus, we believe collaboration is necessary and easier said than done unless priorities are appropriately aligned. Given that the alternative data industry is just starting to come into its own, best practices have yet to be established. Hopefully, LightStream and Nowcast can combine our expertise to do that.
You have worked with analysis and portfolio management in the Tokyo offices of a couple of international alternative investment funds in the past. How does this hands-on experience help you in working with fund managers as clients now?
I think the biggest advantage is understanding what they want, what they value and how they think. I prefer to think of LightStream as an outsourced buy-side analyst shop rather than a sell-side research provider or even independent research provider. We want to generate ideas that generate good returns and we want to effectively identify risks to the trade and be very aware of the path risk for stock prices. I personally do not consider myself a particularly good or bad trader, but I consider it important to try and accurately frame the catalysts and risks of an investment case to make the life of someone who is a good trader as easy as possible. I consider the analyst side of the work to be my calling but portfolio construction and risk management is also a very interesting discipline and intellectual challenge. Being conversant in the latter I feel helps when articulating ideas to PMs and particularly so when you are talking to many PMs who could have very different trading strategies, risk tolerances and investment horizons. My own bent is to look for ideas which are structurally sound and likely to be attractive on the long side for 1-3 years, but within that time period desired sizing could change dramatically based on price performance and upcoming catalysts. On the short side, I find that effective time horizons tend to be shorter, perhaps 6-18 months. Of course, for alternative data driven ideas, trading periods could be much, much shorter depending on what the data is telling you.
When it comes to working with hedge funds and other alternative investment managers as clients, it is becoming more and more important to be able to offer a flexible and often customised service in order to win new clients and keep existing ones. How flexible is your offering?
I absolutely agree. Flexibility and adaptability are increasingly important given the changing landscape not just in the alternative investment management industry but in almost every industry globally. So much is changing that the ability to deploy resources flexibly and have access to a diverse range of skill sets is truly key. We feel that we work very well with funds that require ad-hoc bespoke research as we do not demand specific time period commitments. Many outsourcing companies lock clients in to year-long contracts and bill monthly so even if you don’t have specific ideas that you want work done on you are still paying for that time. We are structured to steadily conduct our own analysis on companies and publish this through platforms such as Smartkarma as our “day job” but have the flexibility to respond to urgent or short-term requests, especially regarding data analysis. Ultimately our client relationships operate on a trust basis and “selling” is definitely not our speciality. We thus focus on trying to be high touch but low maintenance. When our clients have a need we are there and happy to customise our offering according to the exact scope they are looking for. When they don’t, we are quite happy to be out of sight and out of mind until they next need us.