Based in Singapore, Alexis Calla has two distinct functions at Standard Chartered*. He is global head of advisory for the group, whereby he oversees portfolio construction, allocation, advisory and developing market views and investment ideas. He also heads the team of private bank investment advisers and oversees discretionary portfolio management. His other main role is running the private market and mutual fund platform for the private and the retail client segments.
Alexis, I understand private bank sales of mutual fund sales have been rising in Asia – have you seen this?
Definitely, the share of mutual funds in our AUM has been growing nicely, by around 25% in the past four years. Appetite for the complex stuff was gone for a while; people have refocused on simple assets. Central banks have pretty much been dictating what customers should be doing. The natural product in that environment was a diversified mutual fund. But then should you go down the discretionary or mutual funds route? We’ve done pretty well in the discretionary space since 2009-2010.
Some feel that some fund managers should change their approach to selling to and servicing private banks in Asia. Some fund houses seem to be taking note. What are you seeing on this?
The private banking industry in Hong Kong and Singapore is very fragmented when it comes to fund selection. For instance, members of Standard Chartered’s fund selection team are based in Singapore, but clients are spread across Asia, the Middle East and Africa. That is very different from a big global private bank, where most of a fund manager’s relationships will be with people in Europe or the US.
Another question is: are you talking to a firm that has a retail arm as well as a private bank? If you really want to do a good job, make sure you know your segment – they will all have very different needs. Some salespeople would go with one strategy and knock on a bunch of doors with the same thing. But we, as private banks, also could work better; we could articulate better what we want.
The important thing is: What is the true customer benefit of a product? What are the chances of that product catching the relationship manager’s eye and going into customers’ portfolio? If it doesn’t, then it’s a waste of everyone’s time. You need to make sure the product doesn’t just stay on the shelf. You want solutions that are truly relevant to your customers. Also, don’t be afraid to copy successful strategy.
I understand another round of rationalisation of funds and fund managers on platforms is happening at a lot of private banks now. Is this true at Standard Chartered?
There is certainly an economic incentive to go with fewer partners now. Regulators in many places are now much more demanding in terms of the due diligence required to be conducted prior to offering a fund to clients.
We did a lot of ‘cleaning up’ of the product platform. We looked at the product offering during 2009-2011, going into every country and saying ‘what do we really need?’ We have reached a level now where we have what we need.
But yes, there might be some replacements here and there as well as cutting of products. And when we go into new markets, we might need new partners. If we see there’s something we don’t get from existing providers, we would look at others.
What are your criteria and processes for choosing managers/providers?
We use purely third-party fund houses for both the advisory and discretionary businesses. We have two types of asset management partners – big international firms and domestic players in China, Malaysia and some key markets. We try to find firms in the cross-border space that have proven quality and brand recognition.
We use the discretionary side to seek out more boutique managers, because you don’t have a lot of the challenges there that you face on the fund distribution side. For example, you don’t need to worry about brand recognition.
For cross-border business, we work with some large investment houses that can deploy funds in more than one market or can get with us into countries that are difficult to access.
We want people who are going to be there through the cycle, because there are a lot of expenses and hours of analysis at the start when choosing managers, such as due diligence. You have to think about what the new potential partner is going to bring that would make it worth putting them there.
Then there’s the distinction between brand and pure performance. From any investment decision, one is trying to achieve two objectives – providing returns and satisfying all the emotional needs that go with fund selection. Admittedly, brand is more important in retail than in private banking.
*The full interview will appear in the July issue of AsianInvestor magazine.