Choosing Investments from the Clients’ Perspective
Wong Seak Eng, Fund Manager and Executive Director of Singapore-based Aggregate Asset Management (AAM), faced a problem. It was 2012, and the lingering effects of the global financial crisis of a few years earlier were still being felt. Regulatory reform was the order of the day, with new changes to apply to the investment community aimed at better governance. AAM needed to contend with these changes while attempting to get the company off the ground.
Despite the challenging circumstances, AAM successfully qualified and launched. At the heart of the company ethos, the founders decided, AAM would be deeply in influenced by Asian culture. The founders were also personally invested, so they knew they were eating from the same pot they cooked with for clients.
Acknowledging the market frustration, and resentment toward the investment community by some sections of society due to Lehman’s treatment of retirement mini-bonds, AAM’s founders sought to put themselves in others’ shoes and think about how they would want their retirement savings to treated.
The traditional model for large financial institutions is to be driven by building assets under management (AUM). Fees would be charged at 2% of AUM, and there was arguably little incentive for fund managers to help their clients make money.
AAM wanted to bring greater alignment of interests, with a focus on growing returns for clients. If you drove your ailing car to a mechanic, and the mechanic could not x the problem, you would not pay them. However, the fee-driven world of financial services operated differently.
To shift the focus back onto client care, AAM took a considered risk. They prioritized two key values: good and cheap. AAM did away with management fees. It dared to do so because it had confidence in its investment performance over the mid to long term.
Over time, its client-first approach and commitment to growth would make AAM stand out among the competition. However, while investors liked this key attraction of zero management fees, performance remained the most important element of the numbers game. This was not a gimmick, so delivery standards had to be high.
Fund managers saw that investors appreciated the innovative model and took care to protect their clients. Eggs were never piled into one basket. Over time, clients built more trust and confidence in the approach, and the decision to adopt a much more diversified investment style than any competitors’ ensured that, from a risk management perspective, if one investment failed, the client was protected.