Deconstruct complex investment portfolios easily with Eigencat

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Eigencat

Thanks to recent technological advancements, we have access to sophisticated analytics systems that can provide comprehensive advice on a myriad of topics. In the 2014 World Cup, the German Football Association worked with software company SAP to create data analysis tools that provided insights ranging from their opponents’ offensive and defensive tendencies to patterns on how they take penalty kicks. The tools were so sophisticated that even when opponents changed their lineup to throw the German team off, the coaches could reflect the change with a simple drag-and-drop function. Armed with a treasure trove of insights, the German team performed spectacularly and won the 2014 World Cup (CNBC, 2016).

Aside from football, data analytics can now provide advice to lead wealth managers and individuals to victory in their investments. Eigencat, a Singaporean start-up, does this by combining sophisticated quantitative finance analysis with innovative visualisation that not only gives investors access to a wealth of insights on their investment portfolios but also ensures that the insights provided can be readily understood. In this way, Eigencat enables investors to manage the risk and performance parameters of their investment portfolios and guides them to make investment decisions that are within their risk tolerance.

I had the pleasure of speaking with Mr Leong Jian Haur, CTO of Eigencat to learn more about the fintech industry.

Trends in the region

Mr Leong has observed that due to the dynamic nature of the industry, the whole fintech ecosystem tends to chase after hypes. Conferences tend to be held for discussing the most popular technologies and Venture Capitalists (VCs) are attracted to companies that are involved in technologies that are in the hype. Therefore when a new fintech breakthrough is achieved, entrepreneurs in this industry face pressure to adopt these breakthroughs so as to gain access to greater funding and publicity. Giving an example, Mr Leong said that “Robo Advisors” were the craze in 2015 and at that time he saw many conferences, VCs and start-ups rushing into this space to catch the hype. However the “Robo Advisor” technology has since matured and industry heavyweights like UBS, Goldman Sachs, Black Rock and Charles Schwab have started adopting the technology (CNBC, 2016). Now the limelight has been stolen by blockchain and Mr Leong is observing the same pattern of conferences, VCs, established companies and entrepreneurs diving into this new craze.

(Data from CB Insights: The Global Fintech Report: Q3’17)

Even UNICEF has set up the UNICEF Innovation Fund to provide early stage finance to for-profit technology start-ups including block chain start-ups that have the potential to benefit humanity (Unicefstories, 2017).

Riding on the trends

Mr Leong identified blockchain as the hottest technology in the fintech industry currently and if a start-up in this industry is looking for funding, offering blockchain solutions would be the most palatable to the VCs. However given the short life expectancy of hypes in the fintech industry, Mr Leong’s advice is for start-ups to stick to the company’s original vision and focus on core product development, regardless of the hype.

Challenges when expanding overseas

From his experience with bringing Eigencat to Malaysia, Mr Leong observed that there is a clear difference in the efficiency between Singapore and Malaysia. Singaporean companies are highly pampered and operate in an excellent business environment that is ranked 2nd in the world by the Doing Business Index. Additionally Singapore is ranked 6th in the world for ease of starting a business (Doingbusiness, 2017). Across the causeway, Malaysia’s business environment is ranked 24th and in terms of starting a business; is ranked 111th (Doingbusiness, 2017). As a result of the comparatively low efficiency in Malaysia, Mr Leong shared that set up costs can be higher than what Singaporean companies are prepared to accept.

To penetrate the Malaysian market, Mr Leong stresses that Singaporean companies need both familiarity with the market and Malaysian partners. However attaining familiarity can be a challenge for Singaporean companies and in a study by global insurer QBE, 38% of Singaporean companies that had no intention of expanding overseas cited unfamiliarity with standards and processes of foreign markets as the top hindrance (Insurancebusinessmag, 2018). Mr Leong also shared that Singaporean SMEs tend to face difficulty in finding a Malaysian partner as there is little motivation for a Malaysian company to work with an SME instead of a larger and more established company. In the SME Development Survery 2017, difficulty in find partners was one of the most commonly cited challenges when venturing overseas (The Straits Times, 2018). As a Malaysian himself, Mr Leong possessed both familiarity and local partners already when expanding to Malaysia and thus had a comfortable experience with bringing the business overseas; but he notes that other Singaporean companies with only Singaporean staff may not be as fortunate.

Enabling growth

Mr Leong lauded the new Startup SG Founder scheme by SPRING as an industrially sound scheme. Under this scheme, Accredited Mentor Partners (AMP) are the first layer of selection for start-ups looking for grants and will provide assistance in developing eligible start-ups over a 12 month incentive period before submitting a progress update to SPRING which will then disburse the grant to the Start-up if all the milestones have been met. Mr Leong believes that VCs have built up considerable expertise and experience in the start-up space and therefore will be in a good position to decide on which start-ups have the most potential and help them to grow.

(Startupsg, 2017)

However Mr Leong believes that there still is a need for the previous scheme of direct government funding assistance that used to be provided by SPRING. As discussed above, VCs in the fintech industry are generally more inclined to invest in start-ups that are in the hype which right now is blockchain. Therefore companies like Eigencat which have excellent fintech solutions that refine existing technologies or develop entirely new finance technologies that are not blockchain will find difficulty in obtaining support from VCs and thus will have little chance of obtaining grants from the Startup SG Founder scheme. Additionally, getting the product development right is crucial for the success of a start-up, but if they need to chase after hypes to attract VCs, they may have to rush the product development process and deviate from their original vision. Mr Leong suggests that to reduce the risk of the previous scheme of direct government funding assistance, SPRING can perhaps consider setting up a team to monitor how the funds are used and thus manage the risk of abuse.

To lessen the burden of set up costs when expanding overseas, companies can apply for the International Enterprise (IE) Singapore Market Readiness Assistance (MRA) grant, which supports up to 70% of eligible third-party costs for activities such as overseas market set-up, identification of business partners and overseas market promotion.

In addition to financial support, the IE Singapore website provides market guides, trade statistics and IE Insight reports which give a broad perspective of the opportunities in various markets and sectors.

Research databases can also be assessed at:

  1. MarketLine Advantage

Lee Kong Chian Reference Library at Level 7-13 of the National Library Building
Address: 100 Victoria Street, Singapore 188064
Phone: 6332 3255

  1. Economist Intelligence Unit

Available at all national libraries

  1. Leadbook

https://www.iesingapore.gov.sg/Assistance/Market-Access-Leadbook

  1. Trademap

https://www.trademap.org/Index.aspx?AspxAutoDetectCookieSupport=1

  1. StatLink

https://statlink.iesingapore.gov.sg/

Or at Level 11 of the National Library
Address: 100 Victoria Street, Singapore 188064
Phone: 6332 3255

(Iesingapore, 2018)

IE Singapore also helps Singaporean companies find partners in overseas markets. In particular, companies with plans to expand into China, India or Southeast Asia, can join the IE Singapore Plug & Play Network to get connected with overseas partners that specialise in market research, business matching and co-working space providers (Iesingapore, 2017)

Call to Singaporean companies

Whether it is contactless payment, Robo Advisor or blockchain, the financial services industry is set to be shaken up by fintech. According to a PWC report, up to 28% of the Banking and Payments business will be at risk of disruption by 2020 and up to 22% of the Insurance, Asset Management and Wealth Management business will be at risk of disruption by 2020 (PWC, 2016). As the fintech hub of South East Asia, Singaporean companies have the opportunity to benefit from enabling not only Singapore but also our neighbours to embrace the imminent disruptions. Therefore, Singaporean fintech companies need to focus on developing deep technologies to ride on the disruptions, without being too distracted by glamour of the hype that comes and goes in the fintech industry.

References

CNBC. (2016). Athletes to analysts: How big data gave the German football team a leg up. [online] Available at: https://www.cnbc.com/2016/07/07/euro-2016-sap-and-german-football-team-worked-to-develop-big-data-analytics.html [Accessed 13 Feb. 2018].

CNBC. (2016). Big banks try to beat ‘robo-advisors’ by joining them. [online] Available at: https://www.cnbc.com/2016/06/25/big-banks-are-fighting-robo-advisors-head-on.html [Accessed 14 Feb. 2018].

Doingbusiness. (2017). Doing Business in Malaysia – World Bank Group. [online] Available at: http://www.doingbusiness.org/data/exploreeconomies/malaysia#starting-a-business [Accessed 14 Feb. 2018].

Doingbusiness. (2017). Doing Business in Singapore – World Bank Group. [online] Available at: http://www.doingbusiness.org/data/exploreeconomies/singapore [Accessed 14 Feb. 2018].

Iesingapore. (2017). Plug & Play Network – IE Singapore’s Assistance for Local Companies –. [online] Available at: https://www.iesingapore.gov.sg/PPN [Accessed 14 Feb. 2018].

Iesingapore. (2018). Research Databases – IE Singapore’s Assistance for Local Companies – I. [online] Available at: https://www.iesingapore.gov.sg/Assistance/Market-Readiness-Assistance/Information/Research-Databases [Accessed 14 Feb. 2018].

Insurancebusinessmag. (2018). Very few Singapore SMEs have plans to expand overseas – QBE. [online] Available at: https://www.insurancebusinessmag.com/asia/news/breaking-news/very-few-singapore-smes-have-plans-to-expand-overseas–qbe-90696.aspx [Accessed 14 Feb. 2018].

PWC. (2016). Financial Services Technology 2020 and Beyond: Embracing disruption. [online] Available at: https://www.pwc.com/gx/en/financial-services/assets/pdf/technology2020-and-beyond.pdf [Accessed 14 Feb. 2018].

Startupsg. (2017). Startup SG Founder. [online] Available at: http://www.startupsg.net/wp-content/uploads/2017/05/founderflowchart480-1024×593.png [Accessed 14 Feb. 2018].

The Straits Times. (2018). Challenges new and old confronting SMEs. [online] Available at: http://www.straitstimes.com/business/companies-markets/challenges-new-and-old-confronting-smes [Accessed 14 Feb. 2018].

Unicefstories. (2017). Blockchain at UNICEF. [online] Available at: http://unicefstories.org/blockchain/ [Accessed 14 Feb. 2018].

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