Singapore boutique deal reflects acquisition trend
Singapore-based New Silkroutes Group has acquired 51% of $250 million multi-family office Stamford Management, reflecting a trend towards consolidation in the private wealth industry in Asia and beyond.
The move by NSG – whose businesses include oil and gas trading, enterprise info-communication system integration, and network security – is part of its push to expand into asset management.
It follows NSG’s formation of a joint venture with New York-based CG Capital Partners to offer fund management services in Asia. The JV, 70% owned by NSG, will invest in dollar, euro- and renminbi-denominated structured products, and was announced on February 3.
Stamford Management will be renamed New Silkroute Capital Partners, subject to the approval of NSG’s shareholders. The new partnership will target high-net-worth individuals and institutions in Europe, the US, the Middle East and North Africa, and China. The financial terms of the acquisition were not disclosed.
Asked to comment on the benefits of the deal, Stamford chief executive Jason Wang pointed to the value of his firm’s capital markets licence to NSG.
Another attraction for NSG is that Stamford is a specialist multi-family office, he said. William Chan, the current chairman, founded it 2001 to oversee the management of his family’s wealth, before expanding to service external clients in 2006.
NSG, in turn, brings Stamford deal flow and an expanded client base from within and outside Asia.
Wang said there had been interest from other firms in a tie-up or acquisition, declining to identify them. But ultimately the economics and synergies of the latest deal were right, he noted. “NSG have the right business fit for us; it’s a friendly transaction, we have decent knowledge of their people.”
Stamford has a lean staff of 12, because it outsources a lot of its capabilities. That said, it conducts most of its investment – from traditional portfolio strategies to private-market deals – in-house rather than using external asset managers.
There have been a number of deals in the wealth management industry in recent years, including Julius Baer’s acquisition of Jupai Holdings in December, Coutts’ sale of its international operations to UBP earlier in 2015, and DBS buying Societe Generale’s private bank in 2014. The Asian wealth arm of British bank Barclays is also now on the block.
Industry observers argue that this trend is set to continue, amid rising cost pressures and competition, and that business models will have to change.
Justin Ong, asset and wealth management industry leader for Asia Pacific at consultancy PwC, told AsianInvestor: “The time is ripe for further consolidation in the investment industry – particularly in the wealth manager space – as margin pressures and the onset of robo-advisors start to eat away at the traditional business models."
He has received a growing number of queries in the last 12 months from US and European houses seeking opportunities to acquire local asset management outfits. But he has not seen many deals materialise: “I’d say the demand is greater than the supply at the moment.
“My sense is that either the targets being looked at end up being too small or niche to be scalable, or valuations from the seller’s perspective are too high,” noted Ong.
There is a lot of expectation that the regulatory and compliance costs will force smaller houses to close, merge or sell out, but this hasn’t really materialised, he said. “I expect that most have some cash to burn for the next year or so before they have to decide on any major decision.
“Also, the more attractive targets with larger books aren’t available for sale, either due to legacy assets, which risk being lost upon sale, or because the pricing isn't attractive enough.”
All this being said, Ong noted that in the wealth management space, the trend has been for firms to set up on their own rather than buy another business. This is mainly because the process for getting regulatory approval for acquiring a licensed wealth manager can take as long as, if not longer than, applying for a licence, he said.
In addition, acquiring wealth managers can impose higher risk and cost, given the need to conduct client due diligence. “[It can be] easier to just bring the people over and leave the corporate entity behind,” concluded Ong.