Lighthouse Canton’s CEO Shines the Spotlight on the Evolutionary Trends for Wealth Management in Asia
Singapore-based independent investment management firm Lighthouse Canton concentrates on the market segment of institutional and accredited investors. The firm’s Co-Founder and CEO, Shilpi Chowdhary met with Hubbis recently by video link to offer his insights into the firm’s progress, its navigation through the mists of Covid-19 and his vision of the wealth management markets ahead. He explained how the firm is continuing to build a sustainable business model that is not overly reliant on any individual, that has a broad, carefully selected client base serviced by client-facing advisors who understand them and empathise with them, and in-house experts who expedite client mandates with institutional levels of professionalism, all at the same time delivered with transparency and a disciplined alignment of interests between the firm, its teams and the clientele.
Lighthouse Canton (LC) is an MAS regulated investment management firm headquartered out of Singapore, with a relatively new and growing operation in Dubai. Part of the firm’s middle-office and back-office operations are located in India to capitalise on the talent there, as well as cost efficiencies.
The firm’s website emphasises independence and stresses its robust product capabilities across the asset classes, as well as the ability to customise solutions to meet client needs, an institutional class infrastructure and counterparties, and reports that there is now a team of more than 50 professionals looking after close to USD1 billion of total assets under management and advisory.
The holistic perspective of client-centricity
As to LC’s value-added and USPs, Chowdhary believes that the firm’s growth speaks for itself as having carved out a niche in the market. “External asset managers like us tend to look at clients on a holistic, consolidated basis, rather than acting as a banker for a portion of their assets,” Chowdhary reports.
“We also offer open architecture and access to a wide variety of research from other institutions and banks,” he adds.
“We are more entrepreneurial, and we also have a very strong infrastructure, with dedicated asset managers, thereby freeing up the RMs to be relationship people rather than asset management people. This is where I think we have a genuine competitive edge.”
After a successful career in private wealth with major firms, Chowdhary had left Credit Suisse to become Co-Founder of the firm in 2014. After six years of rapid growth and now with an established brand and presence, Chowdhary says he is pleased with the progress, but also that there is much to achieve, especially in the field of funds and the high-growth family office space.
A broad range of services and solutions
Chowdhary explains that he has always had a strong entrepreneurial inclination, and had spotted a particularly interesting opportunity in the family office space back in 2014 as the family office concept was only just opening up in Asia; today it is still a long way from emulating the expansion seen in Europe and the US and offers great growth potential ahead.
“The asset management activity, being institutional neatly aligns and complements that family office business, so we try to combine the best practices for both core activities,” he explains.
The asset management operation includes a fund management business, with LC currently offering four of its own-brand funds, both public (tradable) and private (less liquid). The four core LC branded strategies today include funds focusing on India growth opportunities, a global macro fund, a trade finance receivables strategy, and specialised funds centred on life sciences in India.
“Each of our strategies has demonstrated the ability to deliver superior risk-adjusted returns over different market cycles,” Chowdhary reports. “We aim to offer as much differentiation as possible, so we were the first to launch the short-term receivables financing strategy, which is denominated in Singapore dollars. And while so many funds in the market have been benchmark driven, we consider our in-house funds as absolute returns funds that target investors looking for differentiated strategies which are lowly-correlated to the more traditional asset classes or even among its peers.”
Moreover, Chowdhary explains that to avoid conflicts of interest, the firm has a limit of 25% of client money in their own-label funds, and the teams are entirely separate, with some of the funds managed in partnership with external parties.
“Additionally, we have a broad range of services,” he reports, “so we can provide structuring advice, proposals on succession planning, thoughts on wills, trusts, holding companies, all these areas, and all this requires people with deep understanding, with the quality and capability to make a genuine difference.”
Avoiding conflicts of interest
Pricing transparency is a key focus for the firm, Chowdhary reports, and that also helps with the recruitment of talent, with new hires also attracted by the entrepreneurial character of the business, and the flexibility they have to develop their own relationships and business.
Chowdhary says the firm follows a model whereby bankers are paid a fixed compensation, and then there are tiers in which they make percentages of revenue thresholds, in the range of 20% to 40% as a cap.
“To mitigate conflicts of interest,” he adds, “we charge the clients a fixed fee, which has no relation to how many transactions they make. An example might be 1% management fee on a USD100 million portfolio, so the RM’s incentive is to retain and increase the assets, so the more they bring in, the more they make. This fee-based model offers a natural alignment of interest between the RMs and their clients as compensation is not driven by transaction.”
Chowdhary concedes that there is no way of accurately predicting market movements, but what the firm can do is continue to focus on building robust portfolios with disciplined risk management which will work in most market conditions with the studied constraints applied to those portfolios.
Discipline is required, not guesswork
“We can determine the correlations between the different strategies that we are using to build up a portfolio. We can determine the risk management tools to keep things controlled and on track. That is what we can deliver and will continue to double down on, as that is exactly the discipline required in times of crisis and uncertainty. Trying to guess where the market will go or what this crisis will lead to, that is not within our sights, there are simply so many unknowns.”
“Our advisors stress the importance of understanding clients’ risk appetite and then adapting risk management strategies for the client, so that the portfolios and solutions are bespoke to that client,” Chowdhary explains. “We believe that in portfolio management, we must apply rigorous and active risk management principles and technology.”
A long hard look at the future
Chowdhary reports that the firm is even more ambitious today, as this time offers a great opportunity to differentiate. “With the traditional private wealth management models mostly based on providing mass customisation to clients, and being primarily transaction-driven, we believe that they lack alignment of interest to their clients. We, however, are aligned internally and externally to ensure that remuneration is allied to client centricity. Combined with our careful approach to risk management, this makes a compelling proposition.”
Chowdhary also maintains that the industry needs to take a long, hard look at itself and consider compensation relative to other business sectors. “I am talking here about that level of realism or moderation that needs to come into the industry,” he states.
Chowdhary concludes the discussion with a reiteration of some of the fundamental precepts on which the firm was founded and operates.
“The basic and essential element is for the client advisors to truly understand the client, and certainly not continually offer some sort of pre-packaged solutions which may or may not work for that client,” he explains. “Additionally, throughout the firm and in every dealing with the clients, we must keep things as simple and transparent as possible and keep complexity to a minimum, or for the most sophisticated clients to carefully defined limits. We are here as trusted advisors to our clients for the long-term, that is our belief, and that is how we behave.”
Chowdhary’s Key Priorities
Consolidation, technology and expansion are the priorities, Chowdhary reports. “We have in recent months been weighing up the great opportunities we see and the gaps in our network and infrastructure, so that is priority number one,” he explains. “Secondly, we are intent on building more robust technology and expanding the range of tools and solutions. Third, we also want to grow through expansion of talent.”
He offers more detail, adding that the firm has been in some very interesting discussions to expand onshore in India. “While we have two offshore locations, Singapore and Dubai, onshore India appeals,” he reports. “We are actively working on establishing a footprint there. Thereafter, we might look at building a presence in Switzerland, as we feel that Zurich remains an important global wealth centre. But again, that all depends on the right talent or strategic partnership available to take us to that next step.”
Adding more insight on the technology front, he explains that the firm sees itself as a technology-driven business and will continue to focus its investment and time on improving digital solutions both for internal and external enhancement.
“The firm can today provide all the support services, consolidated statements, for client risk assessment statements for portfolios,” he reports. “We have built our own system to feed in from all the banks for client accounts and create consolidated statements, complete with all risk analytics, on a live, real-time basis, rather than a month-end basis. We are doing this partly in-house and partly with a vendor on the coding side, as we found that there was no plug-and-play solution that fully addressed the complete need that we had identified.”
Chowdhary explains that LC, in fact, works with several technology vendors, including WeInvest, in which the firm has a sizeable stake following a funding exercise managed by Schroders. He is also a Director in the company, which was founded in 2015, helps financial institutions deliver a full-suite digital investing experience to their customers.
“Technology is core to our business as we see it,” he adds. “We must be agile, so for example we built a system to consolidate accounts across banks, and to have the ability to add banks as and when we want, but not depend on a vendor. And we can add tools as needs will evolve over time, and you just can’t depend on third-party vendors for that. So, for example, risk management tools, order management system enhancements, a reconciliation tool, and so forth.”
Moreover, he adds that data is increasingly vital as a core of the decision-making processes. “Unfortunately, in the banking world, data and the speed of its delivery remains somewhat archaic. We are pushing for real-time data for ourselves and for our clients. It is essential.”
And as to talent, Chowdhary explains that the key for the firm nowadays is to find or develop top-quality talent that can truly create awareness amongst potential new clients and deliver them into the firm. “We are trying to build a business that is sustainable,” he reports, “and that is also why we are building an intensive training platform whereby we can hire top-quality younger talent that we can develop ourselves, and send them out to build and develop the clientele, with the established talent and expertise we have in-house then servicing and retaining those clients. What we do not want is the type of banker who simply wants higher pay on a commission basis; we are a value-driven model, and that is a very different proposition.”
He also explains that passion for the industry, for the role of RM, is essential, and not always present, in fact far from it.
“It is easy to identify those who are simply in this line because that is where they began, or ended up, and those bankers and experts who are genuinely passionate about it,” he observes. “But it is tough to find those people, and of course they are in great demand in the market. People we hire need to be far more than sales people, or markets experts, they need to real financial people, understand risk, understand client needs, align their goals, and be able to help their clients holistically.”
He adds that based on these premises, LC is constantly building a more sustainable business model that is less dependent on individuals, less dependent for example on me or other key people, and more institutionalised.
“The backdrop to all this,” he reports, “is our belief that the retrocession, commission-driven model is not sustainable, but our model is and will be, and the development of the fee-driven client base as we have been doing is the right way forward. We do not want to be beholden to a major hit to revenues with one key person leaving, or even new bankers promising so much and then failing to deliver. That is not our model.”
Getting Personal with Shilpi Chowdhary
Chowdhary is the CEO and Co-Founder of Lighthouse Canton. He is responsible for driving the company's vision and objectives as well as overall business directions. He oversees the Multi-Family Office, Asset Management and Bespoke Solutions businesses and creates synergy between the verticals.
Chowdhary had some 20 years of experience prior to co-founding Lighthouse Canton in 2014. Previously, he was a Managing Director at Credit Suisse Private Bank where he managed the Ultra High Net Worth portfolio for the bank. Prior to that, he spent more than six years at Citibank in India.
Chowdhary was born in a small town named Shimla, in the state of Himachal Pradesh. He originally qualified with a Bachelor of Technology degree in Civil Engineering and then attained a Post Graduate Diploma in Business Management from Symbiosis Centre for Management.
“Citibank was a great start to my career,” he recalls, “as I learned much about many different aspects of banking. Credit Suisse was then a great move, and I thoroughly enjoyed my time there. In fact, before I founded this firm, I took them into my confidence in an open manner, and they were very supportive, for which I have great respect.”
Married with a son of 16 and a daughter of 9 years old, Chowdhary enjoys quiet times at home reading and watching cricket on TV. His music tastes are wide-ranging, with favourite bands names such as U2, Metallica and Dire Straits, the first of which was soon due into Singapore.
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