How Nan Fung is institutionalising its family office
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Hong Kong business conglomerate Nan Fung Group’s family office NF Trinity prefers keeping critical investment functions like data analysis in-house, while outsourcing non-core functions, its chief operating officer said.
“The first [thing] for us to consider whether we outsource or we do that in-house is about how critical the function is,” said Janet Hung, NF Trinity COO, at AsianInvestor's COO Forum in Hong Kong on September 24.
NF Trinity
“[The data analytics function] is closely correlated to investment process…This is something that I wouldn’t consider outsourcing, mainly because it’s very confidential and proprietary,” said Hung.
NF Trinity runs a proprietary data analysis team, which Managing Director Helen Zhu led in building from scratch after she joined from BlackRock. The investment chief has also been focusing on institutionalising the family office and streamlining operations.
The family office manages a multi-asset portfolio globally spanning public and private markets across over 20 geographies.
Keeping abreast of compliance needs across jurisdictions and asset classes, from stocks and alternatives to futures, options, and derivatives, has been a challenging endeavor, Hung noted.
While NF Trinity has a dedicated compliance team in-house, outsourcing helps it to track regulatory updates, she said.
“When we think about more standardised functions like NAV (net asset value) calculation, this is something we can outsource,” she added.
Cost is another consideration. “Cost, skillset, and the scale always go hand in hand,” she said.
GROUP RESOURCES
As a leading family office in Hong Kong, NF Trinity has over 40 staff, including more than 20 investment professionals. Its parent company Nan Fung Group has diverse business operations worldwide across property development, life sciences, and shipping.
“NF Trinity has the benefit of shared resources on certain critical functions, those we wouldn't be able to scale,” Hung said.
For example, the group’s proprietary resources from the life sciences and real estate divisions have allowed the family office to keep track of the latest market developments as well as regulatory changes.
Such investments would be difficult to scale if they were done solely from the family office side, Hung noted.
Additionally, Nan Fung’s US-based life sciences team helps NF Trinity to tap into opportunities and market developments in the world’s largest economy.
“This definitely helps [in] institutionalising the family office,” Hung said.
TECH INTEGRATION
Other COOs also weighed in on the topic of outsourcing. HSBC Asset Management’s Asia-Pacific COO Edgar Gehringer noted that for an institutional investor to decide on what functions to outsource, identifying which part of the business is “non-core” – back-office operations such as accounting, transfer agency, and custody, for example – is essential.
With the rise of the digital economy and other technological transformation, HSBC Asset Management has been putting more investment into machine learning and artificial intelligence (AI) at a time when margins are already compressed in public asset management, according to Gehringer.
With ESG and alternative investments rising, more information and technology support is required as well.
From a cost and business transformation perspective, he said, there has been a trend in the asset management industry to outsource via building strategic partnerships while keeping what’s core in-house.
“Over time, it's going to be very, very challenging. I think we are in a very interesting time. The COO position has never been bigger or broader and more transformational than today,” Gehringer said. “We have to look at every opportunity we can to streamline.”
PARTNER MINDSET
Service providers should be treated as partners rather than purely as a provider one pays because the team doesn’t have time or resources in-house, according to Khalil Soubra, Asia-Pacific COO at Allianz Global Investors.
A company needs to work closely with a service provider so that the external provider fully understands the business need of the client, he added.
“We need also to keep good governance and good oversight,” he said.
Euan McLeod, head of transfer agency, Asia Pacific at SS&C Technologies, said asset managers need to trust the partner in many aspects, including with the management of end investors as well as with regulatory changes.
“When we talk about Asian investors…most of our clients are in more than one jurisdiction,” McLeod noted. “That means we as a partner need to be on top of that service quality across those countries."