Sambit Mangaraj on the Value of Rising to the Greatest of Challenges
Sambit Mangaraj, Co-Founder and CEO of UCAP Hong Kong Asset Management Limited (“UCAPHK”), says the world has a huge mountain to climb to emerge from the COVID-19 pandemic. And he knows what he is talking about - in April 2019 he scaled the peak of Imja Tse in Nepal, a challenge that was far harder, and riskier, than he had imagined. But he has no doubt whatsoever that it was of immense value to him, and that he will climb another mountain as soon as travel is again freed up. Mangaraj ‘met’ with Hubbis recently to update us on how his firm is intently building its business through such difficult times, how he is keeping a lid on costs while at the same time bringing more bankers, and therefore more AUM onboard. Nothing is easy at the juncture, he concedes, but he believes the independent wealth management model is literally climbing upwards and winning through with more and more experienced bankers and an ever-growing number of wealthy private clients.
As part of Union Capital Group, which is an alliance of international banking, investment advisory, asset management, structured finance and brokerage firms across multiple locations worldwide, Mangaraj says UCAPHK has great synergies and range to offer.
“The key to our model is the way we interact with the group companies,” he reports, “building a network of businesses that can interact across borders and tap into each other’s expertise and network. “We might be owned and operated independently, but we can draw on the resources and arrangements of global group of companies to benefit our business and add value to our clients.”
A great story to tell
He says that as an independent firm, the firm believes it has a great proposition. “We now have 17 people and we are hiring, but it is fair to say that even though our industry and our market penetration have been expanding, one of the constraint remains finding the right bankers with the right entrepreneurial mindset and experience to thrive in an external asset management environment, where they must work very much independently. They should be able to spot opportunities for their clients beyond the obvious that’s typically available across PB platforms”
He observes that the key to building a strong private wealth business has been the ability to maintain and build strong relationships with their clients backed by a platform which provides an increasing range of specialised solutions for clients. “A key mission for UCAPHK is to offer a global proposition,” he reports, “with best-in-breed products and ideas and to do so, he explains, tapping into the global network of the group, with USD27 billion of AUM now is a major differentiator.”
In Hong Kong, he says the firm is able to take on clients from different jurisdictions because it has licensed vehicles in all the major locations, and can co-manage those assets or advise on those assets with the formal mandate being with the companies from those other locations. “This means we are able to offer clients a much broader canvas than most EAMs,” he states.
Within the larger Union Capital Group there is a bank, an insurance company, a trust company, capital markets business, broker-dealer licenses and asset management and insurance companies.
Sambit explains that there are four key shareholders across all the group businesses, but each is independent of the other, with none of the entities having ownership across the jurisdictions into each other's businesses.
Buy and build
The basis of the model is hiring bankers who bring in new clients, new AUM. ”The EAM concept is growing in status in the past five or more years in Asia,” he reports. “So there is progress being made in terms of experienced bankers acknowledging that we are safe, that we are strong enough, that we have the balance sheet strength, and we have a long-term plan. At the same time, a single Bank platform may not provide optimal client solution, this has led to entrepreneurial bankers are feeling the independent model might be better.”
As to the AUM these bankers actually bring with them, Mangaraj estimates the general norm is that it is tough for them to transition more than 30% to 40% of their old book to a new house. Moreover, account opening and other processes for moving those accounts is time consuming. “However, for those where the EAM already has an existing contractual relationship with any banks then the transition is extremely fast, quick and relatively without glitches. In such cases, I have seen people easily able to transition70% to 80% of their portfolio.”
DPM and advisory
He reports that the UCAPHK model is increasingly moving towards DPM. “We work hard to educate the client on the value of paying an advisory or an asset management fee, and the potential conflicts of interest from relying on retrocessions. Moreover, regulations are encouraging the DPM and advisory models.”
“If you really want to add value to the clients, they need to see the value of completely transparent relationships with upfront fees, rather than the transaction-based, trailer-fee relationship of old. Our position is that we go the extra mile by offering clients a consolidated statement and highlighting if we receive third-party fees. And on the advisory side, we strive to provide best of execution including returning to clients any transaction pricing advantages we secure from what they might have agreed with us. This is incredibly important to maintaining their trust.”
Regarding working with third-party digital or online platform providers, he comments that within the current system, even if he wanted to make changes, it's very difficult. “This is because the banks that the firm custodises the assets with us are still not open for us to be able to trade away using any of those execution platforms, because those entities are not empanelled with those banks,” he elucidates. “We have tried, but many banks are completely hesitant. This means we are dependent on the bank as to who they use for executing any particular asset class. Nevertheless, we remain desirous of the flexibility to be able to use absolutely excellent platforms out there for funds, for bonds, for equities, FX, and so forth, and have the banks settle, but frankly it is not happening yet.”
Keeping control of costs is essential, he reports, so running a lean and efficient operation is vital. “We need to further evaluate the use of office space, the effectiveness of travel compared with digital communication, and of course the IT infrastructure compared with cloud-based computing,” he says.
“I would also like to go completely digital from the onboarding of clients and KYC checks, to execution, reporting, regulatory audits and so forth,” Mangaraj adds. “But that is fine in concept, whereas in reality, we cannot do that if the regulators are not on board, because there is a specific way that you as a private banker have to do the pre trade confirmations, the post trade confirmations, then conduct the reporting to the client and take them through all the features, risks, and so forth. It is still very reliant on physical communication with the client face to face or through a recorded line or through a document back and forth. Nevertheless, within those limitations, we able to fine tune certain parts of the operation, and that is where we focus our efforts.”
He explains that the one major challenge during the Covid crises has been to maintain a sense of corporate cohesiveness when working remotely. “A smaller organisation such as our firm thrives on its character, its identity, its personality,” he comments, “and we need to be in regular communication in order to build idea flows, and for team spirit”
He also observes that WFH is in some ways easier to manage for those who are business creators than for operational staff.
Finally, Mangaraj hopes to bring on at least six to eight new CROs by the end of 2021, building from the current team. “The idea is not to chase numbers but quality of hires. And I would say that anyone who has upwards of USD150 million and is entrepreneurial and independent in his or her thinking and method of working will flourish in an EAM environment such as ours.”
Let the good times return
Mangaraj closes the conversation by reiterating his firm belief in the EAM/IAM model. “You must have the right approach, the right identity and immense expertise and professionalism,” he says. “Growth for the independents is certainly there, providing we maintain our integrity and quality. Right now, amidst this pandemic, the mists are somewhat hiding the true trajectory in wealth management in Asia, which we believe remain intact. In that future, we know the independent model will both survive and thrive.”
Getting Personal with Sambit Mangaraj
“In April 2019 I went to Nepal to climb a mountain called Imja Tse, or better known internationally as Island peak. It's 6189 meters.” Says Mangaraj “And it was such an experience that I had plans to follow that up with a climb this April just past, but of course the pandemic knocked that idea back.”
He reports that the total trip to Nepal was 16 days. “It takes around 10 days to reach the base camp and then the climb from the base camp is roughly 1000 metres, with fixed rope lines, headwall, crevices that you must get over with ladders and so forth. It's incredibly steep, with the last roughly 200 to 300 meters at about 60 degrees angle. It was riskier than I had imagined, actually, and I can say that YouTube videos don't give you the full story.”
Responding to the question as to why on earth he would want to inflict such risk on himself, Mangaraj explains that he has done marathons, and high-altitude hiking, but wanted to push himself a bit further. “Honestly, it was incredible and has now become my new passion,” he says. “I just can't get it out of my head. Next year, all being well, I hope to get back and attempt another peak called Mera Peak, which is 6400 meters, but that's not such a technical climb. It is something that absolutely de-stresses me, the calm, the nature, the elements, the challenges, it all puts our lives in far greater perspective.”
Back on terra firma, Mangaraj is of course still the CEO and Co-Founder of UCAP Hong Kong Asset Management and has built up experience of nearly 20 years working in the financial markets, providing securities dealing, wealth management, and client advisory services including distribution and marketing of investment products to institutional and high-net-worth clients.
He has previously worked in several leading regional and global financial institutions, and before UCAPHK as Managing Director in EFG Bank, Hong Kong.
"In my working life," he explains, "I have tried to gain as broad an exposure to the financial world as possible, which has greatly helped me understand products and markets from capital markets to insurance to private banking and wealth management,” he reports. “Their entrepreneurial spirit spurred me to come and cofound this firm, and we have not looked back since.”
More from Sambit Mangaraj, UCAP Asset Management