Formed in 2010 by the merger of OCBC’s private bank with ING’s Asian private bank business, Bank of Singapore had $51 billion in AUM as of June 30 across offices in Dubai, Hong Kong and Singapore. Part of the 140-strong product group, John Ng is head of research and head of product marketing and Chandrima Das is head of funds solution
Please describe your fund selection process.
Chandrima Das: We have an open architecture platform, hence we have no preferred provider or preferred fee arrangement with any provider.
We look at funds over three to five years on a rolling annual or quarterly basis to see consistency in performance, not just performance. Once we conclude that a fund is consistent in terms of performance and the risk and volatility the FM is taking on is leading to positive results, then we starting looking into the cause of the good performance and whether the performance will continue.
We believe there are four pillars that are drivers of long-term, consistent performance.
One is how the analysts select securities.
Two is how they work together with the portfolio managers. You might have a good team of analysts, but your fund managers may not have the tools to construct an efficient portfolio. So we look at how the analysts and the fund managers work together, how the portfolio is constructed, the kind of tools they use.
The third pillar is implementation. You can have a good bond fund manager, but the bond fund platform might be so narrow that they don’t get good spreads or allocations. Or you can have a good equity fund manager, but the way their fund is structured might not be tax-efficient. So you look at how the fund is implemented in terms of cost, tax and structure, etcetera.
The last pillar is how the fund manager’s business is structured – do they have people in Hong Kong or Singapore to help us? You could have a very good US-based fund that doesn’t the necessary structure or people to service us in Singapore.
If these four pillars are in place, then we want those funds. We are less concerned about brand-building exercises.
Why would you add or remove a fund and how often do you review them?
John Ng: They are constantly reviewed. For private equity funds, we have a continual review process to obtain updates on underlying investments and divestments by the managers.
Das: We spend a lot of time on selecting each and every fund. Unless there’s an issue with portfolio construction or with performance, or with a team member leaving, or with the overall fund manager’s business, we don’t change funds. There isn’t any merit to a regular refresh.
Even a small departure of a key analyst could have a large impact on the fund. But you could also have leadership changes at management level that do not impact the fund.
How many funds are on your list, and how many manager relationships do you have?
Ng: About 100 to 120 mutual funds are on our approved list. We’ve always had a limited number that we follow and advise on. That’s more than enough for most of our clients. They are split into 60 different categories, with one to two funds in each.
Das: We currently have relationships with 65-odd long-only managers.
* The full Q&A appears in AsianInvestor’s Fund Selector Report, which was distributed to a selected list of recipients this month. Please contact Rebekka Kristin at firstname.lastname@example.org for more information or to obtain a copy. AsianInvestor is hosting its first Fund Selector Forum on November 12; please click here for more details.