UOB Asset Management says it has gone live with its robo advisor for corporate clients of its parent, United Overseas Bank.
FNZ, a U.K.-based robo advisory company, built the technology and the user interface (see image), while UOB AM provided the investment methodologies.
Rachel Ong, senior director of business development at the Singapore-based asset manager, said UOB AM went live with 100 clients in early November.
The company first announced its intention to launch the service last year, as a way to get UOB Bank's small- and medium-sized commercial customers to invest their cash holdings.
It spent the past year developing a robo advisor suitable for businesses. The asset manager says this is the first of its kind in Singapore.
Are companies paying the right fee, though, for this new service?
Retail versus insto pricing
Most robo advisors in the region are aimed at individual investors. Companies need a governance model, such as how to confirm who is authorized to transact, and within what constraints.
The other challenge was that UOB’s corporate customers need exposures in Singapore dollars, and most robo advisors invest in U.S. or other international exchange-traded funds.
The firm’s robo product, UOBAM Invest, offers local businesses a combination of UOB AM mutual funds, denominated in Singapore dollars, and U.S. ETFs, which UOB hedges back to Sing dollars.
A 1.3% fee on ETFs sounds extremely expensive
The minimum investment size is S$500,000, however, which is a large amount. If the company does indeed have 100 clients already, that’s already S$50 million of assets under management, at a 1% annual management fee and a 0.3% administration fee. (Lee declined to say how much AUM the robo was now managing.)
Jayne Bok, head of sovereign advisory at WillisTowers Watson, which consultants institutions on their investments, says 130 basis points is a retail price.
She thinks institutions get a better deal investing in passive index funds rather than ETFs. “A 1.3% fee on ETFs sounds extremely expensive, and this excludes the bid/ask spread for trading them,” she told DigFin. “As a rule of thumb, the management fee for an ETF should not be vastly different from fees for passive management in a similar portfolio of securities.”
Another consultant, Peter Ryan-Kane of PeRK Advisory, says he is surprised that a Singapore corporate would want to invest in US dollar ETFs. That said, he puts the product in the context of fintech disruption impacting the industry. "At least a Singaporean bank is trying something," he said.
Ong says one rationale behind the service’s fee schedule was that many mid-sized companies couldn’t meet the minimum investment sizes for discretionary fund businesses. The typical ticket size from large corporations acting as institutional investors is S$10 million to S$20 million, at which rate the fund manager found it uneconomic to offer the same service to smaller businesses.
“UOB AM wanted to find a more effective way to cater to smaller tickets,” Ong said. “UOBAM Invest is online, and completely automated, so that brings down the cost to serve a client.”
UOB AM’s retail funds offer far smaller minimum investment sizes: US$1,000 for its United Global Technology Fund, for example, which according to its September fact sheet manages about $10 million in assets.
But Lee says there has been plenty of demand for a variety of corporates’ risk appetites, and not just for exposure to short-term, liquid, money markets – for which there already exist dedicated products.