Banque Syz eyes move into Asia wealth
An acute talent shortage has been a bottleneck for both asset and wealth management expansion in the region, said Eric Syz, group chief executive officer, in an interview with FSA.
The firm has been distributing its products in Asia, and key markets are Taiwan, Korea, Singapore and Hong Kong. Syz (pronounced "Sits") said his firm's strengths in Asia are European equities, bonds and long-short products as well as multi asset vehicles.
The bank's asset management unit wants to expand its regional presence and is also in talks with fund houses in China.
"The only way to sell into China is with a white label product. We are in discussions with several local counterparties who themselves are a brand in China and are looking for certain expertise."
On the wealth management side, the bank is interested in Asia's private client base, specifically individuals with assets worth at least $25m who are seeking diversification.
"The next bridgehead might be offering what we do on the wealth side to new Asian clients. The intention is not to open a bank, but to establish a front office with a few very senior RMs to advise clients and help them form an investment strategy. The mandates would be executed in Europe.
"When clients reach a certain degree of wealth, they want to diversify their asset base and that is often to stable and secure jurisdictions such as Switzerland or the US.
"We want to cater to those clients, but they want to be served locally and not have people flying in from Switzerland."
However, he said a talent shortage exists in Asia and finding experienced relationship managers has been an ongoing challenge.
"It's very hard to find talented people [in Asia]. We are still actively looking and the search has been going on for a while. Even on the asset management side, we are still hiring a team," he said.
Era of the stock picker
The low interest rate environment has created conditions that make stock pickers more likely to reap desired returns than ETFs, he said.
"You had to be in ETFs from 1982 onwards, when the Dow Jones went from 800 to 18000. If you were long the index, you didn't worry about stock picking. Going forward it's going to be much different as interest rates will remain low for a long time.
"Why did PIMCO grow so big? Basically they had one trade: long the long bond. Thirty years ago, the long bond was yielding 16% and they rode that wave down to 2%. That was an easy trade, but now it's a different story and where is PIMCO going to go now? There will be tough choices on where to allocate."
Interest rates can't go much lower and will likely stay where they are for a long time, he said. The US and European economies have to show sustainable growth before their key market indices can do the same.
The US will grow if there is heavy investment in infrastructure, which so far hasn't happened, he said. Europe needs labour market deregulation to grow above 1-1.5%.
"I don't see [economic growth] happening quickly. It will be a volatile period, so you've to be a stock picker."
The benefits of asset management
Banque Syz has both wealth management and asset management under one roof, a business model that Syz believes is crucial because the two "are interwound".
"To be good at wealth management, you have to have an asset management business. Private clients have a decision-making process often dominated by emotions that are detrimental to the investment process.
"They are often euphoric when investments go well and negative when they go badly. That's pro-cyclical, not counter-cyclical, which has a negative impact on the portfolio. An asset management business provides a disciplined approach and resists emotional decision making."