Crossbridge Capital eyes doubling of assets

EXTERNAL asset manager (EAM) Crossbridge Capital aims to more than double its assets under management from the current US$4.5 billion to around US$10 billion over the next five years.

Crossbridge group chief executive Tarek Khlat said that achieving scale is critical if the group is to continue to grow.

"When we launched the business in 2008, we thought getting to US$5 billion was the right size. But the reality is: We're not big enough. We need scale because regulatory costs are increasing; margins are shrinking and ultimately, clients' risk appetite is changing.

"In the old days, our message to smaller external asset managers or financial advisers was that you can survive if you have US$500 million to US$1 billion (under management), but that's not so today."

The firm is focused on a three-pronged growth path - via acquisitions, new markets and investments in its digital business, Connect.

All the ingredients

Says Mr Khlat: "We have the capital to grow through acquisitions, open more offices, hire more people and to continue to invest in Connect. Those together will make US$10 billion a reality. We hope global markets remain favourable and clients remain happy. We have all the ingredients to make it happen."

The firm has applied for a licence to operate in Hong Kong, which will give the firm a "North Asia focus that we don't have today". The licence is expected within the first half of 2019, and a team of nine has already been identified.

Crossbridge was launched just two weeks before Lehman Brothers collapsed in 2008. Mr Khlat was former group head of the Middle East business for Credit Suisse in London, where he helped build a US$2 billion wealth management portfolio.

EAMs manage wealth on behalf of private clients, families and institutions. This segment of advisers came into its own in the aftermath of the crisis, when trust in banks plummeted thanks to conflicts of interest concerns. EAMs' fee and business model, where clients are charged an advisory or management fee, is supposed to better align the interests of the asset manager and clients.

Biggest team

Crossbridge today has offices in London, Singapore, Monaco and Malta. It employs 37 people globally, of whom 17 are in Singapore - its biggest team to date.

The firm opened an office here in 2010. Connect by Crossbridge, which claimed to be the first digital advisory platform for accredited investors, was launched out of Singapore in 2016.

"Singapore was the perfect market for our Asia strategy, and it became a natural place (for Connect). We could easily have launched Connect out of London, but we felt we had the people here, the knowhow and a regulator willing to engage with us."

Mr Khlat expects technology - that is, the firm's digital business under Connect - to provide yet another engine of growth. Connect by Crossbridge provides a hybrid model combining robo portfolios with human advice.

The firm recently launched Connect Prime - a digital service for the high net worth. Charlie O'Flaherty, Crossbridge partner and head of digital strategy says: "Connect Prime is private banking for the rest of us . . . We realise we can offer what private banks offer, but on a more affordable basis. Clients are able to speak to an adviser, get bespoke planning, and it can accommodate individuals and institutions."

Connect by Crossbridge and Connect Prime have combined assets under management of about US$300 million. Both are for accredited investors. Connect by Crossbridge needs an investment of just US$1,500; Connect Prime needs a S$500,000 deposit to start. For both services, BNY Mellon's Pershing serves as custodian.

Third arm

A third arm is Connect Enterprise, which offers a business-to-business (B2B) service for institutions or financial advisers who wish to white label some of Connect's investment products. BT understands that two financial advisory firms here have tapped this service so far.

Connect portfolios are invested in actively managed certificates issued by Julius Baer. The certificates may invest in individual securities or a basket of securities, or exchange-traded funds (ETFs), among others. The firm argues that certificates are an efficient and low-cost way for investors to get exposure. There are no sales charges, rebalancing fees or brokerage costs.

Connect's all-in fee ranges from 0.2 to 1.25 per cent. The lowest fee of 0.2 per cent is for a low-risk deposit alternative.