SRP: former Vontobel head rolls out MIP targeted at EAMs

Hong Kong SAR-based Goldhorse Capital Management today has launched Extramile, its new multi-issuer structured product platform (MIP), which will leverage on its ability as an independent intermediary to bring bargaining power to external asset managers (EAMs).

Long Lee (pictured), former CEO of Vontobel Limited - the financial products arm of Vontobel Holdings in Hong Kong SAR - will spearhead the cloud-based platform after joining the six-year old company as CEO on 12 October. In an interview with SRP, Lee elaborates on the platform functions and his outlook on the EAM market in Asia.

“Extramile positions itself in the middle of buyers and sellers and functions like a traditional interbank-broker from one perspective,” Lee told SRP.

"We are targeting 12 to 15 payoffs in the next six to 12 months"

The platform supports lifecycle and sales management, record keeping, research reports as well as product advisory - Goldhorse obtained its Securities and Futures Commission (SFC) licences for advising on securities and dealing in securities last February, which is uncommon for existing multi-issuer structured products platforms, according to Lee.

“I can’t say for Asia, but in Hong Kong SAR, we are the first and only one offering such a platform targeting EAMs,” he said.

Goldhorse has 14 employees at present, spanning a CIO office, dealing team and back-end team, as well as a ‘double-digit’ number of EAM clients, according to Lee.

Capabilities

Developed by Goldhorse last December, Extramile has seen a trading volume of US$2 billion through close to 1,000 trades year-to-date. “This year has been a difficult year to gauge any trend at all, but we saw very good numbers in Q3, and Q4 is not bad at all,” said Lee.

Ten issuers are currently quoting on the platform including Credit Suisse, UBS, Morgan Stanley, Société Générale, Nomura, Natixis, BNP Paribas, Vontobel, Leonteq and Citigroup.

Payoffs available have expanded from fixed coupon notes (FCN), bonus enhanced notes (BEN), accumulator and decumulators to range accrual, equity-linked notes (ELN) and target redemption forwards (TARF).

“We are targeting 12 to 15 payoffs in the next six to 12 months. However, our dealing team can service various structured products like fund-linked notes and actively managed certificates [AMCs], or even a bond repack,” said Lee, adding that equity underlyings remain dominant. “Lifecycle management and risk control are the two most frequently requested areas from our clients.”

The pricing discovery takes around 60 to 90 seconds on average, and a trade can be executed within three to four minutes if the clients are ready.

Extramile also provides house views including daily recap, multi-asset class strategy, conviction list and macro analysis, as well as materials from third parties such as daily key investment highlights from investment banks.

As part of the firm’s product advisory service, there will be daily trading axes, weekly investment theme and biweekly trading ideas, which are supported with live chatroom, according to Lee.

Additionally, EAMs can track their transactions and analyze the trade data for risk, trade or sales management purposes.

“They can now see a matrix of custodian banks and issuers and our system can prevent error trade due to onboarding setup,” said Lee, adding that the platform also enables EAMs to filter the issuers that have no partnership with their custodian banks through a click of button.

“In addition, different product requirements from the issuers are displayed straightforwardly, such as the minimum or maximum ticket size.”

Wholesale 

The platform available in English and Chinese is targeted at EAMs - a group that’s under-serviced by investment banks but growing rapidly in Asia, and is likely to include small securities houses or even private banks later next year.
EAMs pay no subscription or upfront fee to join and access research reports at Extramile but pay a volume-based commission after each trade.
“Goldhorse is not part of the settlement process,” said Lee. “In fact, we are the first ‘B’ in the ‘B2B2C’. Strictly speaking, we are not even in contact to ‘C’ and have absolutely no interest in their information.”
Lee highlights the platform’s bargaining power to offer wholesale pricings for EAMs, regardless of their trading volume.
“Most EAMs do not have the capacity to speak to more than just a few issuers on a regular basis, whereas due to our platform volume we are able to scan the rest of the market for them,” said Lee.“It’s a one venue to compete for billions of flow versus small manual tickets all over.”
“We are issuers and/or custodian agnostic, making our views or suggestions unbiased and independent, and this is something I was not able to do in my past life for obvious reason.”

Next

Goldhorse is also looking to develop a mobile application and incorporate more lifecycle pre-alerts, such as a specified percentage away from barrier hit or early knockout, as well as provide more efficient risk control including trade size control.

“Lifecycle management and risk control are the two most frequently requested areas from our clients,” Lee said. “Right now, we are mostly handling post-trade service via email or in our secured chatroom on Extramile. Both types of alerts and medium of communication have room for improvement.”

Big data is also set to be deployed based on the buyside’s transaction history in order to provide automatic tailor-made solutions.

The blueprint is closely connected with the positive outlook of the EAM market as some private banks are setting up dedicated EAM desks to service this growing sector.

“Tremendous amount of wealth has been created from the IPO market this year,” said Lee. “From what I can see, the pipeline for Q1 21 is just equally strong. Some of this new wealth is likely to flow either into single family offices or EAMs.”
The asset under management (AUM) by EAMs in Asia ranges from US$100m to US$5 billion, which is contrasting from any private bank in Asia that would easily be managing US$25 billion. According to Lee, there are more than 100 EAMs in Asia.
“As a result, it’s labour intensive for issuers to cover the EAM market,” Lee said. “However, its growing presence has made it a segment that is difficult for them to ignore.”

Asian countries remain far behind their counterparts in Europe when it comes to the percentage of wealth managed by EAMs, specially Switzerland. " A catch up is due," Lee concludes.

Source: SRP: former Vontobel head rolls out MIP targeted at EAMs