THE ROLE OF GOLDMAN SACHS IN SUPPORTING THE EAMs AS A GLOBAL FINANCIAL INSTITUTION
In the classic EAM business model, there will be three players: the client, the custodian bank and the EAM legally contracted to one another. The EAM typically offers investment advisory and discretionary portfolio management, tax and succession planning services to clients. The clients of the EAM can choose the custodian bank where they would like to maintain their account and assets. The clients would appoint the EAM to manage the assets with the custodian bank based on a limited power of attorney (LPOA) over the account. Besides account opening and servicing, the custodian banks can provide access to trading platform and research analyses for the EAM to execute their trades.
As EAMs grow in assets under management (AUM), the larger ones have been engaging directly with the Investment banks and their fund houses. This interview aims to shed insights on how Goldman Sachs Asset Management (GSAM) could support the EAMs on their needs and contribute to the growth of the EAM sector in Singapore.
Disclaimer: This article is purely for educational purposes and should not be misconstrued as promoting EAM.
Ms Tan Suyin is an Executive Director in the South and Southeast Asia Client Business Team for Goldman Sachs Asset Management (GSAM). She joined GSAM in 2013, spearheading the private bank distribution efforts for GSAM’s long only mutual funds and alternatives across advisory sales, discretionary and external asset managers. Prior to joining the firm, she served as a Director of Retail Distribution at Henderson Global Investors for 13 years, responsible for business development across consumer and private banks, insurance companies, independent financial advisers and asset managers in Asia. Suyin received her Bachelor of Business degree from Nanyang Technological University in 1999.
Q. Being a global financial institution, what is Goldman Sachs’ partnership framework with the EAMs?
A. Our partnership framework with the Singapore-based EAMs is typically via our intermediary channels, across global and regional private banks. EAMs typically have a range of banks as custodian partners, with which the client’s assets are held and booked. We engage directly with the private banks and hence indirectly support the EAMs through their partnership with private banks.
In the recent years, we have also had direct engagements with EAMs where they have started outsourcing dedicated mandates in the form of separate managed accounts to fund houses and/or if they have discretionary portfolios where our fund(s) are selected for their asset allocation needs.
Q. What would be some of Goldman Sachs value proposition for the EAMs?
A. We believe our value proposition is as follows:
- We provide thought leadership and research, exchange of market views and asset allocation via webinars, roundtable discussions/events and regular updates.
- We also provide customised solutions in the form of separate managed accounts and mandates.
- We provide active investment strategies particularly for themes where EAMs need specialist teams to manage. For example, thematic equities such as global millennials/healthcare/technology; regional equities such as China A, India equity, Japan equity; etc.
- We further provide alternative investments - both multi-manager hedge fund solutions and private equity.
- There is cross collaboration within Goldman Sachs, where structured products could also be an investment option for EAMs and their clientele.
- We offer competitive fee pricing, with institutional share classes made available for EAMs’ discretionary portfolio needs.
- We are focused on ESG/sustainability and as asset owners, we can advocate for changes directly with our portfolio firms.
Q. What are some challenges when partnering directly with the EAMs compared to a traditional institutional investor? How can these challenges be addressed?
A. EAMs vary by their business proposition. We have interacted with EAMs who have dedicated advisory, discretionary and/or both businesses. As EAMs in Asia are generally younger and hence, lower in AUM than the EAMs in Europe, there are times where we face challenges in meeting their mandate size and customising solutions for their needs.
EAMs are more price sensitive and may request for lower minimum investment size for separate managed accounts than private banks/institutional investors. Some may prefer ETFs over funds. Having different custodian banks’ relationships would also mean that it might be more difficult for fund houses to track the EAM flows directly.
We have taken a focused approach in building our distribution network for global/regional private bank relationships, which we have seen success in engaging with the EAMs via our intermediaries.
Q. What is the minimum relationship size for Goldman Sachs to support an EAM?
A. The minimum initial subscription for our institutional share class in our Luxembourg SICAV fund range, is $1m which EAMs can have access to Goldman Sachs Asset Management’s funds via our private banks’ intermediary channels.
The minimum amount for separate managed accounts on the other hand, will vary depending on the asset class, strategy type and investment guidelines.
Q. How does Goldman Sachs foresee the growth of its relationship with EAMs in the next 3-5 years?
A. EAMs have had a growing presence in Singapore over the past few years, we believe this trend will continue to grow, supported by our authorities to create favourable conditions for the wealth management industry. Variable Capital Company (VCC)1 and digitisation are examples of regulatory support to build an eco-system for EAMs, single family offices (SFOs) and multifamily offices (MFOs) in Singapore.
Moreover, the expected trend of growth of the EAM industry is supported by the characteristics of EAMs. This comes from their stance in providing the best quality advice and solutions for their client through greater alignment of interest, autonomy and independence in managing client’s total wealth portfolio, ensuring the building of a longer term relationship with the client. Other external factors like digitalisation in wealth management and openness of a younger population to other forms of wealth management will help continue to drive this trend of EAM growth.
Background
This interview was conducted by the research team comprising Dr. T Mandy Tham, Assistant Professor of Finance (Education), Academic Director, Master of Science in Wealth Management, Sino Suisse Fellow, Lee Kong Chian School of Business; Ms Esther Kong, Senior Deputy Director and Ms Juliana Koh, Research Associate, Business Families Institute, Singapore Management University, with Ms Tan Suyin, Executive Director of Retail Client Business Asia ex Japan at Goldman Sachs Asset Management.