Family offices tend to use private banks only when they have to, for services such as custody and execution, and sometimes for deal sourcing. But some are growing more disenfranchised with what the banks can offer and the approach they take.
Swiss multi-family office Nutrimenta is one such institution. It works with around 15 banks – mainly private banks – globally and a handful in Asia, said Singapore chief executive Asaf Berman*.
“In a nutshell, they used to be great counterparties, but they have changed to become something between a counterparty and a regulator,” he told AsianInvestor. “They’re losing their identity as business counterparties. This is a global phenomenon.
“They are becoming harder to deal with in so many ways – they are terrified, full of fear, all about compliance, traumatised by the 2008 crisis. This makes execution and growing the business much tougher.”
Other family offices have made similar points to AsianInvestor. And some, such as Tahnoon Pasha, also point to family clients being unhappy with private bank offerings due to the fees charged, non-aligned interests and insufficiently diversified product offerings, among other things.
Nutrimenta started life as a single-family office for Switzerland’s Jaglom family before transitioning to a multi-family operation in 1972. It set up a branch in Singapore in early 2011.
The MFO manages around $1.7 billion of external capital, as well as money for its founding family. Asia represents the fastest growing component of the portfolio.
Nutrimenta Singapore is very active in direct investments into high-yield and credit markets, but less so in sovereign debt and equities.
Asked his view on the relatively lower returns from credit these days for what many see as relatively high risk, Berman is sanguine.
“We’re much less exposed to duration than the industry and most of the market, which reduces our exposure to the mark-to-market downside of these assets. And we’re less bothered [by the low returns right now] because we’re not forced buyers.”
As for the growing competition in Asian credit investment, Berman’s view is the more the merrier.
“The big guys coming into the market present a great opportunity for us, as they are typically the worst allocators in terms of nimbleness. It’s easy for the Fidelitys, Schroders, KKRs of the world to raise $500 million, but to allocate it smartly in Asia is very hard.
“These guys living and breathing on basis of capital inflows and outflows of typically Western money are great to compete with. Our capital is relatively sticky and long-term. And because the market here is so thin in terms of liquidity, but has a lot of participants, being small is a great advantage.
Nutrimenta beats the benchmark not because its people are smarter than the likes of KKR, but because it is more nimble, said Berman.
* A full Q&A with Asaf Berman will appear as part of AsianInvestor’s cover story in the upcoming (September) issue.