PWM APAC Summit 2014 - Homiyar Vasania

Why Wealth Managers Should Focus On
Steady, Cash-Generative Businesses
expertise and insight of an institutional
fund manager will have an edge.
How does this impact
wealth management?
Interview with: Homiyar Vasania,
Chief Executive Officer, River Valley
Asset Management
“In the low return environment that we
foresee, there is a strong reason to
refocus on “Return of Capital and Return
on Capital”, which requires a cogent
investment process as the foundation of
the wealth management business,”
recommends Homiyar Vasania, Chief
Executive Officer, River Valley Asset
River Valley Asset Management is a
fund management company at the
marcus evans Private Wealth
Management APAC Summit 2014, in
Kuala Lumpur, Malaysia, 27 - 29
What is challenging private wealth
managers in the region today in
their attempts to add value to
wealth portfolios?
Wealth managers need to have a robust
and consistent investment philosophy
and process . RVAM’s long -term
investment construct is based on a
macro environment of low growth and
low interest rates. Our total return
expectation is therefore appropriately
calibrated. The upside to low growth is
an improvement in corporate free cash
flow. Consequently, a larger proportion
of total return would come from cash
returns rather than purely growth.
We are increasingly finding many
strong, steady businesses with lower
than historic growth but improving
balance sheets and stronger cash
generation. These excite us as their
ability to generate cash return is high.
The market consistently undervalues
“ s te ad y” and “ pr ed ic tab le ” and
overvalues “growth”; hence the
businesses we like are cheaper than
they should be. Our process is focused
towards gaining from this anomaly.
Though ours is an “all season”
investment philosophy, it becomes
particularly potent in low interest rate
environments like the current one.
How do
The biggest challenge is that there is no
easy money to be made any more.
Fixed income returns are low and
lever ag ing has r un its co urse .
Conventionally favoured asset classes
like property and fixed income seem
less attractive. Hence we have to revert
to understanding, managing and taking
more risk.
The returns from our targeted assets
would be less volatile and more likely to
beat long-term returns from most other
asset classes. We expect nearly half of
our total returns to come from cash
coupons (either dividend or interest).
This is not dependent on the market,
but only on the performance of the
business. Total return is thus anchored
around this cash coupons number.
A wealth manager’s function is
increasingly moving towards that of an
institutional fund manager. Entities that
combine the service levels and
transparency of a conventional private
wealth manager with the investment
Consequently, we prefer companies with
higher-than-market dividends and free
cash flow - ones with “steadier” and
“more predictable” businesses which, in
turn, have lower stock price volatility.
This also allows us to maintain
moderate portfolio leverage to enhance
returns; due to the current low cost of
funds, this is a low risk return
What risks could this investment
style bring on board? How could
they be avoided?
This type of investment style could
underperform in a strong bull market
but even then the absolute return would
be on target. In a quickly rising interest
rate environment, this portfolio could
have a pause in terms of performance,
but performance should subsequently
continue, as we believe the rise in
interest rates would only happen with a
better global growth outlook and this
portfolio does have leverage to growth.
In a low
and managing
to the right
is key
About the Private Wealth Management APAC Summit 2014
marcus evans Summits group
The fifth annual Private Wealth Management APAC Summit is the premium forum
delivers peer-to-peer information
bringing elite buyers and sellers together. The Summit offers regional SFOs, MFOs,
on strategic matters, professional
wealth advisors, and international fund managers and consultants an intimate
environment for a focused discussion of key new drivers shaping wealth
preservation and investment strategy. Taking place at the Hilton Kuala Lumpur
Hotel, Kuala Lumpur, Malaysia, 27 - 29 October 2014, the Summit includes
presentations on strategic asset allocation and risk management, co-investment
opportunities, family governance, lucrative alternatives to boost returns and more.
Please note that the Summit is a
Sarin Kouyoumdjian-Gurunlian, Press Manager, marcus evans, Summits Division
+ 357 22 849 313
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About River Valley Asset Management
A Registered Fund Management Company under MAS, RVAM offers multi asset class investment services via bespoke managed
accounts and an offshore fund to accredited investors including family offices and institutions.
RVAM focuses on businesses’ cash generative ability to achieve high unlevered return on investment with relatively low volatility.
Homiyar Vasania, CEO, was senior fund manager with Morgan Stanley Asset Management’s EM team for 12 years, since March
2000. He directly managed over US$5bn, with his Asia team managing over US$12 bln.
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