A robo-advisory framework “is ideal to manage the most liquid part of a [large] portfolio”, Michele Ferrario, co-founder and CEO of Singapore-based robo-advisor Stashaway, told FSA.
Because robo-advisors use highly liquid products, such as exchange-traded funds (ETFs), he believes family offices and high-net-worth individuals (HNWIs) would find a robo-advisor particularly useful in efficiently managing “the most aggressive part of a liquid portfolio”.
A relative newcomer to the robo-advisor space, Stashaway launched its service in Singapore in July 2017. The firm targets the mass affluent segment, usually defined in the industry as individuals with $100,000-$1m of investable assets.
Stashaway will have a growing competitive field as robo-advisory services continue to pop up in the region. Earlier this month, Kristal.ai launched its robo-advisory platform within a regulatory sandbox established by the Monetary Authority of Singapore to foster their development.
Both firms join more established players in the Singapore market, such as Autowealth, Smartly and iFast, the owner of the mutual fund platform Fundsupermart.
Stashaway invests in portfolios consisting of US-listed ETFs. It uses 19 ETFs corresponding to asset classes: nine equity, eight fixed income (including convertibles and inflation-protected bonds), real estate and gold. Each of the firm’s 28 model portfolios holds between 7 and 12 ETF positions. They are rebalanced as needed, if the allocations exceed pre-determined thresholds, which are checked daily.
Ferrario said the process is differentiated because it uses analysis of macro-economic data, risks and valuation to adjust the asset allocations with changing market conditions, while maintaining the level of risk suitable for each client.
On a more granular level, allocations are also adjusted for the valuation expectations of each asset class. The process has recently resulted in tilting US equity exposure away from a broad S&P 500 ETF toward sectors such as consumer discretionary and technology ETFs, according to Ferrario.
Retail base
While family office and HNWIs clients will take time, Stashaway is marketing its services to other segments of investors.
“Because we have a zero dollar minimum balance, we attract also retail customers, whom we are happy to serve,” Ferrario said. The firm’s platform accommodates these small accounts by facilitating fractional ownership of the ETFs that constitute the portfolios.
He declined to disclose the number of clients or assets under management.
The robo-advisor has a retail fund management licence in Singapore. Ferrario said that the firm was in conversation with regulators in other countries in the region, with the aim of launching its service outside Singapore.
The firm has so far secured S$4.1m in funding, Ferrario said. The largest investment has come from the family office of Francis Rozario, a former CEO of Fullerton Financial Holdings and a long-term senior executive of Citigroup, who is now serving as Stashaway’s non-executive director.
Since August 2017, FSA has been tracking the monthly returns of three robo-advisors operating in Asia to help the wealth management industry gauge performance, which tends to be missing from the robo-advisory debate.
