StashAway’s Head of Hong Kong on Building the Brand and the Great Potential of North Asia
After receiving the relevant licences from Hong Kong’s Securities and Futures Commission in February, Singapore-headquartered StashAway has recently launched its digital advisory platform in Hong Kong. StashAway is a digital wealth management platform that offers investment portfolios for both retail and professional clients. Its technology delivers automated, systematic, personalised portfolio management for each client's individual portfolios, offering clients 12 globally diversified growth-oriented investment portfolios based on 33 US-listed ETFs and targeting different levels of risk with incredibly low fees, no minimum balance and withdrawal fees, and unlimited withdrawals. As of January 2021, the company managed more than USD1 billion in assets. StashAway’s key focus is not on individual security selection but on building portfolios that are optimised for today’s world via ETFs and across multiple asset classes. Hubbis met by video call recently with Stephanie Leung, Director and Head of StashAway HK and Group Deputy CIO, StashAway, who joined the business in mid-2020 after a successful career that included seven years at Goldman Sachs and a variety of other key roles, including opening her own hedge fund and running investments for a single-family office. She explains that investors are drawn to the platform as they can easily invest based either on risk levels, whereby the risks of the portfolio stay constant at any time, or with a goals-based investing approach driven by personalisation.
It was Italian citizen Michele Ferrario and his two co-founders who set up StashAway in 2016 in Singapore, receiving their CMS licence from the MAS in 2017. The idea was a simple platform that is sophisticated, intelligent, and cost effective. With operations also in Malaysia and the MENA region, and most recently Hong Kong, StashAway has clients from more than 160 countries and 190 nationalities. StashAway is therefore already an established player in the digital wealth advisory market, with more than USD1 billion of assets under management.
Its rapid growth is due to its user-centric design, free education resources, and sophisticated investment framework. These aspects make it easy for anyone to start investing effectively, positioning StashAway as a competitive alternative to traditional wealth management providers.
Low-cost, easy to use
The platform is a low-cost and easy-to-use investing platform that provides intelligent asset allocation with global US-listed ETFs for both retail and professional investors. The company was awarded a Technology Pioneer by The World Economic Forum and a Top 10 LinkedIn Start-up in 2020.
Leung joined after accruing more than 17 years of experience in managing multi-asset portfolios globally, as well as for institutional investors and family offices. She observes: “You'd be surprised to hear that wealth management in Hong Kong has largely been limited to traditional providers, who often operate on and are incentivised by high commission-based fees and high minimum investment amounts. But StashAway breaks those barriers and makes investing accessible to all, with client support available through our mobile and web app, 7 days a week.”
Freddy Lim, Co-Founder and CIO, StashAway, said at the time of the Hong Kong license being granted: “We manage risk and returns by investing into large, liquid, and globally-diversified ETFs, and by continually optimising our portfolios to ensure that they remain resilient in any economic environment. This approach means anyone can invest safely over the long term, withdraw any time, and effectively plan for their future. We make it easy for anyone to start investing effectively, positioning StashAway as a competitive alternative to traditional wealth management providers.”
StashAway reports that the 12 portfolios on offer have consistently outperformed their respective same-risk benchmarks since their inception in 2017, with annualised returns ranging from 16.5% (for its highest-risk portfolio) to 4.0% (for its lowest-risk portfolio) in USD terms as of March 2021.
StashAway makes use of US-listed ETFs because the firm believes they offer the best total expense ratio (TER) and liquidity for its customers. This also provides a broad array of asset classes, Leung explains, noting that the platform has 33 ETFs to choose from.
Across all segments
Leung explains that StashAway is agnostic as to the wealth of the clients that use StashAway, remarking that most digital or robo-advisors have targeted retail and mass affluent customers, but that StashAway will increasingly target HNWIs and will also engage wealth advisors in the months and years ahead to offer service above the standard retail offering, delivering the capability for more in-depth discussions about the markets and asset allocation recommendations.
She also highlights how there is human connectivity even for the retail clients, with a customer support team there seven days a week. She says that the firm prefers not to use the word ‘robo’ as there is the human element involved and that it is therefore not an entirely ‘remote’ experience for the users.
Expanding the model
StashAway holds fund management licenses from Singapore's Monetary Authority of Singapore and Malaysia's Securities Commission and an asset management license from the Dubai Financial Services Authority. StashAway and its subsidiaries obtained its licenses from the Securities and Futures Commission (SFC) in Hong Kong for Type 1, 4 and 9 regulated activities.
StashAway has also raised USD61.4 million in six rounds of private funding. The company's financial backers include Eight Roads Ventures, the global investment firm backed by Fidelity and early investor in Alibaba; Square Peg, the largest venture capital fund in Australia; Asia Capital & Advisors, the private equity firm led by Francis Rozario and Aaron Rozario; and Sequoia Capital India, one of the region’s leading venture capital firms.
Leung highlights the first-class technology, noting that StashAway is recognised by the World Economic Forum as a 2020 Technology Pioneer for developing cutting edge technology and contributing greatly to improving the democratisation of finance and investment access. Past recipients include Google, Airbnb, Palantir, Twitter and Spotify. “Some fifty percent of our payroll goes to technology,” she explains, “and we aim to remain at the cutting edge of digital.”
Safety at the core
She also points to the custodian structure, noting that StashAway’s custodian bank for receiving deposits is Citibank (Hong Kong) Limited while Citibank and HSBC hold securities and investable cash in Singapore, respectively through a trust account maintained by the firm’s broker, Saxo Capital Markets Pte Ltd, incorporated in Singapore.
“With these custodian institutions, customer assets are always in a segregated account – one that is separate from StashAway’s operations and assets. This means that the customer will always have full access and claim to their assets no matter what happens to StashAway,” she explains.
StashAway’s 33-strong world of ETFs
As to the world of ETFs on offer through the platform, she explains that the 12 portfolios are built on the 33 ETFs that cover a wide range of asset classes, ranging from US equity to China internet sector, US sector ETFs to gold and commodities or fixed income. “We have a very strict criteria for selecting the 33 that we think are the most liquid, lowest cost, offer the broadest diversification, lowest tracking errors and then build our portfolios from this selection.”
She reports that the firm’s technology then automatically controls what she calls the ‘intelligent layer’ where they are actively managing exposure to these 33 ETFs.
“Through our intelligent asset allocation framework, which we call ERAA®, or Economic Regime-based Asset Allocation model, on a real-time basis, we monitor all incoming economic data, and according to where we are in the cycle or in the regime, we basically optimise the portfolio.”
Optimised to risk parameters
This, she explains, means that at any given time, the portfolio would be exposed to the best risk-adjusted selection of ETFs. “For example,” she elucidates, “right now, some of the exposures are in US small caps or China internet stocks or gold, so the optimiser ERAA® algorithm achieves this automatically. It takes in economic input and the output is the selection of the optimised ETFs. As we manage the portfolios for customers 24/7 and 365 a year, all you need to do is select the risk you will take on or the goals you are aiming to achieve.”
The 12 portfolios are differentiated by risk points, called the StashAway Risk Index. “Keeping this simple,” she says, “the SRI range is between 6.5% and 36% on the highest risk side, and that means that if users actually choose roughly the middle of the range at 20% - and many do – they are buying into a portfolio that has only a one percent chance that your drawdown will exceed 20% in any given year.”
Managing expectations, looking longer-term
She reports that this is remarkably innovative. “In all my years as a professional investor I have never seen this level of sophistication on offer,” she reports. “Risk is the key, and it is quantified and the whole process is therefore very transparent for the clients. We do this because we are trying to empower people to build wealth over the long term. The S&P has returned 7% to 8% per year for the last 45 years, but people lose money because they don’t know the risks they are taking on, they then invest with emotion and often cut out when there's a major market drawdown, whereas if they knew the risk they took on and hold on they would produce far higher returns.”
She cites the Covid-19 meltdown as a good example because the market actually went down sharply in the early months of 2020 but has since recovered and marched further ahead. “Our portfolios at that time also had drawdowns, but the drawdowns were just about where the StashAway Risk Index was,” she explains. “Hence, clients with a 20% SRI portfolio saw it drop by 20%.”
She rightly explains that nobody cannot stop or avert market crises, but the firm can help prepare our investors for these volatility events.
“Market corrections of 20% to 30% or more happen every so often, so if our investors are aware that their portfolio will likely drop about 20% at those times, they are ready and prepared. Their question may become actually ‘should I be adding right now?’. So, this is why we start with risk, and we try to educate our investors in terms of how to think about risk and quantify risk for the portfolio.”
Asia still has massive potential
Leung explains the Hong Kong office was the next logical step in the drive to become Asia's leading digital wealth advisor. “In Asia, over 40% of the liquid assets are still kept in banks, which are offering zero interest rate, and that is a great appeal also in Hong Kong, where investors follow similar patterns to in Singapore. We see Hong Kong as the foothold in North Asia. We operate in Malaysia since 2018 and we opened in Dubai late last year. Hong Kong also has WealthConnect building out in the coming years, so the opportunities are immense.”
Leung concedes that the model is not yet making money, as fees are so low, and the AUM is only around USD1 billion thus far. “The model sees us positioned towards the customer’s lifetime value to us as a client,” she explains, “We don't charge people transaction fees, it's a transparent, single management fee of 0.20% to 0.80% of AUM. The mission is to build trust and confidence and grow the client base and grow with the clients, as they become wealthier. The sweet spot customers right now are 25 to 40 year olds, mass affluent professionals. We see huge value in bringing them to our platform at the earliest possible time.”
Trusting the model, building the brand
She explains that there are obvious barriers to trusting a new platform such as StashAway, but that when the barriers are hurdled, there is immense potential in each client. “Moreover,” she reports, “some 20% of our AUM actually comes from the HNW segment, and we are expanding that as rapidly as possible. We have our AUM targets internally, but those are not public. Part of the expansion will be innovations in our asset management strategies and product range.”
As to those products, Leung remains coy, but says they should encompass, for example, greater involvement in ESG, in thematic investing, perhaps also in digital assets too.
Drawing in new customers
Leung also explains that the platform serves all types of investors, from those who love the whole idea and practice of investing to those who are cautious about the world of asset management or who simply have no time to manage their own portfolios. “We are also aiming to encourage investors in Asia to think about their wealth and portfolios in a more structured and holistic way. We are indeed providing a fund management service to a buyer, as the clients are essentially handing us the discretion of managing that portfolio. And as to our advice, that centres on life goals, so working through the app they can set their goals – retirement, home purchases, education funds, or whatever – and the app advises them how much to save for those goals.”
Then for those not so familiar with risk, StashAway can through the app direct them to a certain risk category that they should take. “That is the most important decision that they need to make in the investment process,” she explains.
Education is a vital key
Additionally, the platform provides financial education via weekly commentaries on markets, on events pertinent to the investment world, and invites clients to virtual seminars on simple concepts like financial planning, asset allocation and so forth. “And we also offer financial planning sessions for selected high net worth or corporate clients we want to build a deeper relationship with,” Leung reports. “New markets, new products, and further expansion into the HNW and corporate segments will, we believe, result in the AUM rising sharply in the foreseeable future.”
The first priority focuses on financial education, in Singapore for example operating successful outreach to companies and their employees. “We call this our financial wellness programme that we offer for free to corporates,” she explains. They are well received, and help greatly with conversion rates of potential to actual clients.”
Online marketing is another key area, with many customers coming through Facebook, LinkedIn, Google. And the firm also pursues some more traditional marketing, for example in Singapore advertising in the underground system, or similar in Malaysia.
“In short, we are raising brand awareness, and that translates to greater interest and then helps with conversion,” she reports. “It takes time, as we are a new model and a relatively new brand.”
Leung was born and raised in Hong Kong, then studies for her undergraduate years and her Masters in the US. She earned her degree at the University of Michigan in Computer Engineering and her Masters in computer science, specialising in AI. “That was 20 years ago when it was all new and emerging as a concept,” she reports.
She began her career in macro research at Goldman Sachs as part of the APAC Strategy Team, then in 2010 moved to the prop trading desk, also at Goldman.
In 2013, she then created Calabas Capital as Co-founder and Portfolio Manager. Calabas is an equity long/short hedge fund, with a focus on generating alpha from a deep understanding of structural and temporal macro trends across North Asian markets.
“It was a long-short equity-based hedge fund, but still macro focused,” she explains. “Then in 2015, I helped another Goldman colleague, an ex-private banker, who was trying to set up her own EAM. So, I actually took my hedge fund, and I folded it into her bigger asset management company. Then in 2017, I joined a single-family office, where I was managing the investment team.
Another exciting venture she has been involved in since 2016 is the Snow and Flow Snowsports School. As Co-founder and Advisor, she helped create Snow and Flow as a licensed snow sports school based in Niseko, Japan, with professionally certified instructors who offer lessons in Mandarin, Cantonese and English. Additionally, she is involved in the introduction to Asia of the first-ever air purifying lamp, Airluna. Using patented technology, PACO, Airluna provides uncompromising air quality to homes and offices, she explains.
“It was with the EAM that I really opened my eyes to how rich people actually manage their money and how they can actually generate a lot more return if they focus on the longer term,” she explains. “So I evolved from a short-term type of approach at Goldman into a much longer-term asset allocation type approach, and it was a natural step to come to StashAway. When I look at the values that we represent, the investment framework that we have, it has been what I was wanting to do for a long, long time.
Leung enjoys time off exercising, running every day and then enjoying snowboarding at competitive levels, as well as successfully completing a 100 mile race around Mount Fuji. “Japan was my second home in Niseko,” she says, “but the pandemic has messed that up. Sailing is my thing here now instead, and I have now seen and enjoy a whole different aspect to life in Hong Kong. Quieter moments at home are spent with a glass of nice wine.”
Her final word of advice to younger people starting their careers is to network. “Trusted friends and networks have been super important to me over all the years,” she says. Those help you during the inevitable ups and downs.”
More from Stephanie Leung, StashAway