Raffles Family Office Talks about COVID-19, Singapore Vs Hong Kong, China Economy

Shruti Advani

6 July 2020

is a wealth management business that has been making a splash in Asia, and this news service has covered plenty of stories about it, such as here and here. It is an example of how wealth management is evolving into a variety of business models across Asia. The sector is not as dominated by banks and insurers as used to be the case. As wealth creators age and start to pass on money to their children and grandchildren, their attitude towards assets change. At the same time, advisors must offer a full range of services to stay relevant, such as offering clients front-row seats when tasty investment deals are on offer.

This news service recently spoke to Kendrick Lee, who is managing partner and Derek Loh, head of equities at the Hong Kong-headquartered firm.

The world has changed since our last conversation; how has the COVID-19 epidemic affected your business?
Kendrick: The effects of the virus have been much more serious than we had initially expected. Having said that, our core business is still on track - we continue to manage a little over $2 billion of assets and have had no redemptions so far. We also expect to expand, as planned - the target is $4 billion in assets by the end of this year - and I still think we will get there. We have just announced a very senior hire and continue to look for seasoned bankers to join our team, all of whom are expected to bring assets. We are also actively looking for investment managers, particularly in Singapore. So, despite the disruption, our road map has not changed dramatically.

What has been the biggest change to your business so far?
Kendrick: All our meetings are now on Zoom! I had never even used Zoom before this crisis.

Are clients comfortable discussing business on Zoom?
Kendrick: Clients are happy with a phone call to discuss business, they are seasoned investors and most don’t need more than a conversation to calm them. We used WhatsApp and WeChat to communicate with clients before the current situation, so Zoom is an add-on used only if a client requests it. Internally, we use Zoom a lot with our teams in Hong Kong and Taiwan as well as to continue the interview process with some candidates.

You continue to interview candidates, even over Zoom?
Kendrick: This has actually been a very good time to approach certain people who are at banks and were previously not open to a move. They are now considering different possibilities. The HR consultants we work with confirm that they have seen the same trend - candidates are more receptive to a host of alternatives.

But surely the lack of face-to-face meetings is not the only disruption to business right now? What about credit risk and margin calls?
Derek: We would be lying if we said it is business as usual, but because a large number of our clients are UHNWs they do have tremendous holding power and they realise that it doesn’t make sense to unwind now.

Kendrick: Where portfolios are leveraged, we ask for a 30-40 per cent buffer which has proved to be enough so far. What proved crucial for us was how quickly we responded and whether we could unwind leveraged positions early enough. For us, that point was reached when the bid-ask spread kept widening.

You have a pan-Asian perspective on the situation of the financial centres - Hong Kong and Singapore - which is more fragile?
Kendrick: We have 57 people working for us across offices in Hong Kong, Singapore as well as Taiwan. Initially, the situation in Hong Kong was most worrying. The complete lockdown in China was unprecedented. But that situation has very quickly reversed and China is now the only country in the world which is lifting the lockdown. Once China is back to business, the flows will get turned back on for the rest of the region.

Derek: Asia took the first hit in this crisis but what that did was allow us to pre-empt the crisis going global. Having that time to react saved us a fair bit of pain by the time the situation deteriorated in Europe and the US.

What is the view on China now?
China will lead this recovery and it is time to pivot towards equities in China, or by proxy, in Hong Kong. The US is yet to see a peak in the infection rate but new infection rates in China are already starting to taper off so we are overweight China compared with the US.