Keeping It in the Family

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Carret Private co-founder Kenneth Ho demystifies the multi-family office and how Asia’s uber-wealthy like to invest their money, writes Jennifer Khoo


“Old investment bankers go to the banking graveyard and die away,” says Kenneth Ho, managing partner at the Asian arm of multi-family office Carret Private on why he made the switch to wealth management almost two decades ago.   


Prior to joining Carret, the Taiwanese American MBA holder enjoyed a decade-long stint as one of five founding partners of Julius Baer’s Asia Pacific platform, helping expand the business into the fifth-largest private bank in the region. But as the franchise grew, Ho says he found himself becoming a victim to his own success as the highly personalized, tailored approach possible in the early stages of growth became unsustainable.


So when offered the opportunity in 2015 to build New York-founded Carret Asset Management’s Asia franchise from the ground up, he jumped at the chance. With help from a couple of former Julius Baer colleagues, Carret’s first Asian multi-family office was born the following year in Hong Kong. 


“When we were growing JB it was fun, entrepreneurial and exciting,” he says during our 40-minute interview at the Garage Society co-working space in Wanchai. “But when you get bigger and bigger you lose that, you become a supermarket. My partners and I don’t want to create a private-banking supermarket.” 


Multi-family offices typically take on fewer clients than private banks, operating on the principle that ultra-high net worth families prefer highly catered and customized investment services. That certainly seems to be backed up by data from the most recent Capgemini World Wealth Report, which found that almost half of high net worth individuals polled in the benchmark annual survey of the sector said they didn’t connect “very well” with their advisers.


“Our whole platform is built as a boutique where we’re not meant to take on 5,000 clients,” says Ho. “We’re meant to take on 50 clients and service them really, really well.” 


Wealth management and private banking are interchangeable terms, says Ho, in that they both involve managing wealthy people’s money. The main difference is that private banks have a banking license and their employees bring money into the company. And investment options are mostly limited to the bank’s own products.


Carret doesn’t have a banking license, and its employees don’t bring money into the company. Instead it operates a multi-custodian business model that assesses and recommends the best products on the market, allowing for a “highly catered, highly customized” wealth management service for the firm’s UHNW clientele.


“This is part of our power, because we can find the best custodians for our clients,” says Ho.


So like an independent financial advisor? 


“I don’t like using that term, it’s more retail, but yes, from your perspective. The difference is that our clients are typically in the 50-plus million dollar range whereas IFAs typically deal with clients in the 500,000 dollar range,” he says. 

Crazy rich Asians


Carret’s service offerings are catered to Asian clientele, a degree of specialization that  Ho says the bigger banks aren’t able to provide. 


“Private banks take global models and try to apply them to Asia, which alienates Asian clients,” he says, adding that this has only been reinforced by tighter regulations in the wake of the global financial crisis. 


“Banks have become very strict in all their processes,” he says. “But as such, the investments they put on their platform are what I call ‘supermarket investments’ – everyone is offering the same.”  


As an analogy, Ho points to the world’s biggest wealth manager, UBS, which he likens to Walmart: “They are only going to take Lays potato chips, whereas I’m able to find Korea’s best potato chip shop, which is fantastic and has a great track record, even though it is very regionally focused,” he says.  


A real-life example of Carret’s greater freedom and flexibility in sourcing investment opportunities for clients is Gaw Capital Partners. The Hong Kong-based real estate fund bought the InterContinental Hong Kong hotel for US$940 million in 2015 and a sizable chunk of the multibillion portfolio of Link REIT, Asia’s biggest real estate investment trust, in March this year. 


“When customers at private banks want to invest in real estate they only have access to well-known, global private equity firms like Blackstone, for example,” he says. “The banks can’t use Gaw Capital because it’s relatively too small, a regional player.”


Brushing off the suggestion that smaller or lesser-known means riskier, Ho says the sourcing of investment products at the bigger banks tends to be done from centers such as New York, Zurich or London, and so they simply aren’t able to evaluate some Asian prospects that are more regional in focus.


“These bigger banks offer investment products with more of a global focus. If you invest into Blackstone, you’re investing into a global real estate fund. We’re investing into the Asian real estate portfolio of Gaw Capital,” he says. “That’s the only explanation I can give. It’s not because it’s more risky.” 


Regardless, Ho says Asian clientele do tend to be more adventurous with their money than their counterparts in Europe and America, where more of the wealth has been handed down over generations.


“The mentality of those [US and European] clients is ‘you guys take care of it and report back to me in six months. Don’t take too many risks, don’t lose my money,’” says Ho, who spent an earlier part of his career working for Salomon Brothers in New York.


“In the US, when you invest, you don’t trade and punt, like, five stocks. But here in Hong Kong everyone’s always talking about individual stocks,” he says. “Out here, a lot of people have successfully made their own money and think they are smarter than the rest of us. And they might be right.”  


Ho says China’s wealthy tend to take a “barbell approach” with their money – an investment strategy that is hyper-aggressive at one end of the scale, mildly conservative at the other, and avoids the moderate middle ground.   


“These clients will invest in high-risk private equity and also keep money in the bank,” a strategy that makes sense in countries like China where bank deposit rates remain high, but which raises the bar on yields Carret has to offer. “I’ve got to reach for returns of at least 3 percent to be able to even attract these people,” he says. 


At the same time, the team at Carret invests a lot of time into assessing the risk appetite of clients and building risk profiles, taking a fundamentally long-term view and always cautioning yield-hungry clients against “irrational exuberance.”  


“Trust me, when markets get high people start forgetting that they need to put their kids through college,” he says.


“We tend to look for outstanding investments in more risky areas that other banks can’t offer, but the core of our business is putting together very safe, sound portfolios for the future, and that part of the portfolio is not too exotic.” 


Keep it clean…


“Don’t judge a book by its cover” may as well be an industry slogan.


“Everyone in China is literally one generation away from farmer,” Ho says. “I remember at Julius Baer, on any given day there would be some guy wearing shorts and flip flops coming in from Szechuan who’s a billionaire. 


“The toughest job in our industry apart from dealing with changing regulations is figuring out how this guy got his money. How he got it offshore, is it legal, who’s he working with.” 


Hong Kong presents its own, different challenges. Potential clients will likely have inherited their money, which makes it tough to meet today’s ever-tighter rules on “know your customer” – or KYC.


“For example, a wife inherits money from her husband who sold their business 20 years ago. [Before investing it] she has to prove how she got the money from her husband, how he sold the business and show the proof of sale. Who is going to have that from 20 years ago?” says Ho.


“It’s really hard to get a hold of that information. It’s not like today where everything is electronic and can be downloaded for a fee. Banks and financial institutions have to get all that information and trace it back to the first dollar,” he says.


Strong client relationships that are built on mutual trust aids the crucial KYC process, Ho says. That’s particularly important in Hong Kong, which was ranked fourth globally in the Tax Justice Network’s 2018 Financial Secrecy Index.


“Most people anywhere you go are reluctant to tell you too much about how they made their money. But if someone walks in with a billion dollars, you’ve got to figure out how they’ve made a billion. The last thing we want is to be seen as enabling money laundering.”  


And if anything fishy is discovered? 


“We turn people away every day. I want to grow my business but I also have to maintain my company license,” he says. “If I lose my license I lose my breadwinner.” 


Carret founder Philip Carret's 12 Commandments of Investing


  1. Never hold fewer than 10 different securities covering five different fields of business;

  2. At least once every six months, reappraise every security held;

  3. Keep at least half the total fund in income-producing securities;

  4. Consider (dividend) yield the least important factor in analyzing any stock;

  5. Be quick to take losses and reluctant to take profits;

  6. Never invest into securities about which detailed information is not readily available;

  7. Avoid inside information as you would the plague;

  8. Seek facts diligently, advice never;

  9. Ignore mechanical formulas for value in securities;

  10. When stocks are high, money rates rising and business prosperous, at least half of the portfolio should be placed in short-term bonds;

  11. Borrow money sparingly and only when stocks are low, money rates low and falling, and business depressed;

  12. Set aside a proportion of funds for the purchase of options in promising companies.