Actively managed certificates – Opening doors to third-party capital

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Singapore-based Straits Investment Management (SIM), which manages assets for parent firm Straits Trading Company, started accepting money from third-party private and institutional clients in October last year. Chief executive Manish Bhargava discusses the current investment environment and how SIM uses actively managed certificates (AMCs)

 

How is your investment portfolio set up? 

Manish Bhargava, SIM
Manish Bhargava, SIM

Manish Bhargava: We invest globally in publicly traded real estate equities (real estate investment trust and developers). We run a diversified book and tend to avoid concentrated bets. 

 

What are your main portfolio concerns right now? 

Manish Bhargava: Global central banks have cut rates to near zero and have committed to keeping them at these levels for the foreseeable future. This massive stimulus could trigger inflation, so staying in cash is going to be very painful. Real interest rates have turned negative in the US and several other economies. Managing money in a zero interest rate environment will be the most important topic of discussion in the coming months/years. Dividend yields are dipping but remain far higher than bond yields. We believe investors will be forced to increase their allocation to equities, and in fixed income they will have to move down the credit stack to get yield.  

 

How have you been using AMCs for your client portfolios? 

Manish Bhargava: We’ve launched one – Straits Global Property – with UBS. It is an absolute return strategy, investing primarily in real estate securities. 

 

What are the main benefits of this product? 

Manish Bhargava: It was very quick and easy to launch – we got it up and running within a month. It has helped us take on third-party capital from family offices and accredited investors, and assets under management have grown significantly since launch in October 2019. It is operationally light, UBS publishes the net asset value daily and trading commissions are quite sharp.

 

What sort of markets does the AMC invest in? 

Manish Bhargava: Our investments span across the developed markets – the US, UK, western Europe, Japan, Australia, Singapore and Hong Kong. Our portfolio is 100% liquid. 

 

What has the performance been like? 

Manish Bhargava: As of September 16, we are up 6.9% (net of fees) year to date. In comparison, the Global Real Estate Index (FTSE EPRA/NAREIT Developed Index) is down 15.2% year to date. 

 

What do you see as the benefits of using UBS for an AMC?

Manish Bhargava: UBS has a superior product in comparison with other providers. They were very competitive when it came to pricing. Their online platform is also very easy to use, completely web-based and can be accessed from a tablet or smartphone. That has been very useful during the Covid‑19 pandemic – having the flexibility to monitor and trade the portfolio from anywhere in real time.

 

What about the second AMC you are considering?  

Manish Bhargava: We have started the dialogue with UBS. However, it’s still early in the process for the next one, which could be in the fixed income space. n

 

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