A: I come out at least twice a year, but this time I am here to oversee our new expansion plans. We have a very strong and profitable business in Asia and we believe that it's now time to expand our business in the region. The first step in this process has been to hire some more staff for our offices in Hong Kong, Singapore and Tokyo. The next step is to increase our client base and to offer more services. Apart from pure private banking services, we want to offer portfolio management, accountancy services, trust and legal services and family office type services. We want to have a broader base.
Q: The operation of "family offices" is a core competency of LGT's in Europe, how does it fit in Asia?
A: I have seen some people advertising for a bank to act as their trustees or family office managers, so there's clearly a need for these services in the region. There's a lot of wealth building in Asia and people are starting to look beyond their borders for ways to make that money grow.
Q: Which countries are you looking to expand in specifically?
A: Obviously Japan is a large market for us and we're very interested in China. We think clients in these countries are ready to look outside of their borders for a banking relationship.
Q: I understand that Bain & Company has helped you to develop your Asian strategy?
A: Yes, it's been good to have a sparing partner when developing a plan like this because they've been a source of discipline and helped us stay on track. They have also done all of the information gathering, formatting and presenting which otherwise would have taken our senior management a long time and required them to switch focus from their day-to-day responsibilities. We didn't want our in-house senior managers to do the work of consultants. Bain & Company has helped us to set goals for Japan and Asia ex-Japan. We began to implement their suggestions at the end of last year and have now finished our first round of hiring.
Q: How many people will you be hiring?
A: We've hired seven senior people so far and have been able to identify very good people. We will probably hire two or three more this year. Over the next few years, our staff numbers will reach about 70 people in ex-Japan Asia. A few of these will be working in a booking centre in Singapore, so there'll be about 30 in Singapore and about 40 based in Hong Kong.
Q: What is your target for business growth over the next five years?
A: In assets under management terms, we hope to increase our business by 500% in that timeframe. At the moment, Asia only represents about 1% of our global assets under management, so we have plenty of room to grow.
Q: A few years ago you made the announcement that you would be getting out of direct asset management, is that still the case?
A: Yes, we are concentrating on private banking and we don't want to be in competition with the very big houses on the asset management front. So we outsource a lot of our asset management to various fund houses. But we do have some very strong capabilities in investing in particular asset classes such as alternative investments. Here we can definitely compete with the best of breed houses on performance. We have put the systems together, the research, the screening processes and the reporting processes so that we can offer very efficient alternative portfolios to our clients.
Q: Do your clients in Asia understand alternative investments?
A: Yes, because they're not the average retail investor. They are investors who have a lot of experience in different asset classes including global hedge funds and private equity vehicles.
Q: So why use LGT for making alternative investments?
A: As a large bank we can offer access to investments that are not so easy to access directly. They may have long lock-in periods, or there might be large minimum amounts that need to be invested, or the fund might require that an investor is given a personal introduction before they are welcomed into the club - a lot of these funds choose their own clients, not the other way around. We are a very large principal investor ourselves and the conditions that we get from these funds are more favourable than if a client goes directly. This is where we can help out.
Q: Are you reviewing the firms that you outsource to in Asia?
A: This is something that is always under review. We have a strong internal team of analysts that are constantly looking at who we use on the asset management side. They look at fund performance, investment styles, back office efficiency levels and many other aspects of the business. It's a detailed process. They also address a lot of our philosophical questions about why we use particular firms and how we balance the mix of fund managers. We're very good at picking the right outsourcing partners for our clients.
Q: Do you use local firms or just multinationals?
A: Sure. We look for specialists in particular asset classes and often these skills are present in local firms only.
Q: Any plans to buy an Asian private bank or a book of local clients to build you business?
A: I have looked in the past, but I am reluctant to buy banks. You usually end up with a lot of business lines that we don't want to inherit. Then you get into a situation where you have to sell off small bits of the bank which can cause other bits to fail because the staff become unsettled. In Europe at the moment, banks also have a very high premium, often costing 5% of assets. This is high and would take a while for us to recover the cost of our investment. Organic growth is what we are aiming for. We have the capital to finance our own growth.
