Date
18 December 2017
Water Cheung of StormHarbour Securities feels traditional fund managers may see their roles get eclipsed in the coming years.
Water Cheung of StormHarbour Securities feels traditional fund managers may see their roles get eclipsed in the coming years.

Traditional fund managers seen under threat in new internet era

Experienced stock traders who are active on social media will eventually take up the role of traditional fund managers due to the rise of internet finance, according to an investment banking veteran.

“Why should investors pay 2 percent of their portfolios as commission fees to the fund managers to buy stocks that anybody can directly purchase from the market?” Water Cheung, senior partner and Asia-Pacific chief executive at StormHarbour Securities, told EJ Insight.

Most of the commission fees is actually spent on marketing, administration and compliance, and only about one-fourth of the fees goes toward investment analysis, Cheung said. Under such practice, fund managers will inevitably become more conservative and tend to only buy blue chips such as HSBC Holdings plc (00005.HK) and Tencent Holdings Ltd. (00700.HK), he said.

Cheung also said investors cannot get the latest news about their portfolios, given the current practice of fund managers to give a quarterly performance report.

iMaibo.net, a financial website which Cheung founded more than a year ago, has gathered a group of “grassroot investment experts”, who can give comments on specific stocks and market trends for the netizens, the market professional said. Such people will some day become investment advisors or fund managers for the members of iMaibo.net, he said.

“They are required to disclose their real investment portfolios, instead of just recommending a stock without talking about the investment strategies,” Cheung said. The things that need to be disclosed include the investment size, holding period and portfolio breakdown. “Simply tipping a stock is way too far from making a real investment.”

Cheung said iMaibo.net may have to raise funds in the near term to expand its marketing and information technology divisions. The website’s latest valuation stands at about US$20 million, up from US$7.5 million when the start-up began operations with angel funding of US$2.5 million.

Nanfang Daily Media Group currently owns 20 percent stake in the website while other shareholders include Guangzhou CK Telecom Ltd.; Koh Boon Hwee, former chairman of DBS Group Holdings and Singapore Telecom Group; and Haitao Zhang, president of CITIC Capital Holdings Ltd.

The website, operated by 28 staff, has so far seen its user numbers double to 180,000 this year. The management is seeking to monetize the site by generating advertising revenue, selling virtual gifts and holding marketing events. The business expects to break even by mid-2015.

Southern Weekly former chief editor Xiang Xi, who was demoted after interviewing US President Barack Obama in 2009, remains an advisor to iMaibo.net. Xiang is currently working in Guangdong provincial government’s propaganda department.

Cheung said iMaibo.net has adopted a go-for-mass strategy similar to that of US website StockTwits. He believes such business model will have huge potential in mainland China. iMaibo.net counts Xueqiu.com as one of its major rivals in China.

–Contact HKEJ at [email protected]

JP/RC

Chief reporter at EJ Insight

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