All for one and one for all

As the saying goes, in any team sport, it is always the weakest link that makes even the very best team lose its home ground match.  Each player plays a critical role of ensuring that he or she gives the best of his or her own ability to the team.

This is not only for their own personal satisfaction, more importantly, it is for the glory of the entire team, to captivate the loyalty of their fans and the respect of their deserving opponents.

This analogy can be squarely applied to the crowd funding industry, in Singapore or anywhere in the world.  The “players” are the incumbent crowd funding platforms and the aspiring new entrants (collectively “platforms”).  Together these platforms represent the crowd funding industry (team).  How each platform conducts itself in the market place will have a positive, neutral or negative impact on the entire industry.  The above is especially so, in the context of Singapore for two reasons.

Firstly, whilst the concept of using financial technology for crowd-funding has been around for more than two decades, globally speaking, this trend has only caught on in Singapore in very recent years.  As with all things new and especially when money is involved, it hinges on reputation, and reputation to succeed.  Inherently, each platform has to shoulder a common responsibility of ensuring that the public perception of the entire industry (team) is one of repute.  No matter how successful our own platform already is or may become, it will only take one weak link (errand platform) to give the crowd funding industry a bad name.  That is the reality especially so in the social media and trial by media world that we live in.  Mr Trump comes to mind but that is another story altogether.

Secondly, again as with all things new, crowd-funding can be seen as a hype, something faddish that will quickly fade away just like that cutesy bubble tea shop around the corner from my home.  So, just like any sporting match, the platforms must have the stamina to last the full duration of the game and not “run out of steam” before half time!  If the public impression becomes one where crowd funding platforms are perceived to exist just for a “quick win” and perhaps they are “here today gone tomorrow”, the industry will not be able to reach its fullest potential.  Hence, as with Singapore’s nation building era during the days of our fore fathers, each platform has to see themselves as part of a team player, whilst retaining their own identity and playing style, they have to firstly come together as a team to build a sustainable, bona fide financial eco-system.

With the above in mind and coupled with the possibility of headwinds ahead of the crowd funding industry (I do believe tension is good for us), if we are divided on our mission, we will not get pass half time in the game.  We cannot lose sight of the vision that crowd funding platforms can actually change lives by providing bona fide alternative source of financing that can benefit all stakeholders involved.

In conclusion, the Singapore Government has recently set the vision of becoming a SmartNation.  The financial technology space is a critical pillar of this initiative.  Crowd funding platforms have much to gain from this financial technology pillar.  The stakeholders, that is financing and investing community, will also have much to gain and lose from it too.  Crowd funding platforms can only thrive if we have the on-going confidence and trust of the stakeholders.  Hence, we have to ensure a winning team so as to build this new alternative financial eco-system that is credible and sustainable in the long run for all Singaporeans to benefit from.

At Minterest, we have come to form the standpoint that we are here to serve the stakeholders.  How Minterest live, breathe and eat must always have these peoples’ interest at heart.  Hence, we believe that as a crowd-funding platform, we have to maintain not only our own credibility but to also call upon other platforms to come together to do the same.  All for one and one for all!

For more information about peer to business lending or if you just want to ask anything under the sun, please send me an email to [email protected] or visit us at https://www.minterest.sg.

Alamak, not fried rice again!

My grandma used to refer to me as a “bee tang”.  In Hokkien, it means rice bin or 米桶 in Chinese – referring to someone who consumes a good amount of rice.

When I was a child, I could finish a big serving plate of white steamed rice blended with mashed salted egg.  My love for fried rice is well known amongst close friends of mine.  My favourite kind of fried rice is the one luncheon meat in it, not just any spam, but the Ma Ling type!

Recipe for Ah Ron’s fried rice (Serves 4)

You know something? I can’t help thinking how a good tasting fried rice with the right textures, flavours and colours is pretty similar to how a good investment portfolio should be.  If the fried rice is balanced properly (or dare I say, perfectly?), it is the ultimate comfort food to me.  It is the same for my investment portfolio.  It needs to be of the right balance – types of investment products invested through multiple channels, diversification of products within the channels themselves.  A well-diversified, balanced investment portfolio is key to managing investment risk while earning acceptable returns.

Like a good plate of fried rice, having seemingly the right balance of ingredients that you do not normally think will work together, an investment portfolio that has investments that have a low correlation to each other helps in spreading and reducing overall risk.  Investments with similar attributes e.g. in the same industry or rely on the same economic factors have a high correlation to each other.  A low correlation means that your investments are reasonably independent of each other.  You should aim for a portfolio that include investments that have a low correlation to each other so that should some perform badly, others may not.

At Minterest, we aim to offer this variety of investments for our investors.  People have asked, what segment of industries do we focus on?  The simple answer is that we don’t.  Not because specialisation is a bad thing, but we want to provide our investors with the widest investment varieties possible.

Minterest’s team are made up of experts in cash flow analysis with good understanding of macro-economics, we strongly believe that we can deliver good investment opportunities to our investors irrespective of the borrowers’ industry or profile.  If you invest in a well-structured instruments, you should end up with a diversified portfolio within the Minterest platform – this is what we advocate to our investors.  Pretty much like a well-rounded plate of fried rice with all the textures, flavours and colours.

A big bowl of fried rice curled up on the sofa watching an episode of Downton Abbey and knowing my investments are well balanced and diversified – now that’s comfort.  Till next time, may your investment journey be a profitable one!

For more information about this article, how you can diversify your investments or if you just want to ask anything under the sun, please send me an email to [email protected] or visit us at https://www.minterest.sg

My secret weapon to investing

“Hey, Ron, share with us your investment strategy leh!”, I get that a lot from friends often.  Yes, I have made a fair number of investments in my time.  Some successful ones, some not so.  But do I have an investment strategy?

Well, come to think of it, I never really had one, a so-called strategy when I started my “investing life”.  I like to invest in stuff that I use or companies that resonate with me.  For example, I invested in Lululemon shares because I like their technical athletic apparel and in film making as well as artificial intelligence.  Pretty varied, eh?

As I start to search for an answer, there is one thing that keeps coming back at me.  And I think it is my secret weapon to successful investing.  Now, come closer and let me whisper into your ears… “diversification”.  Yes, diversification is the key to success in investing.  “What? That is no secret at all”, I hear you cry.  Very true, but the secret is applying it diligently.  More often than not, as amateur investors, we do not put theory into practice.  So, ladies and gentlemen, the secret is applying the not-so secret weapon called “diversification” every time an investment decision is made.

As I began to write this, my mind brings me back to my past.  After all, the past shapes our present as we mould our future.  “Ah Hee-ah, remember not to put all the eggs in one basket!” Huh? But I have only one basket leh.  My grandma used to shout at me in Hokkien as I walked towards the chicken coop at the back of the family house when I was seven or eight years old. It is such an old cliché but one to bear in mind especially when it comes to investments.

In my mind, there are three key factors in the diversification process.

1) PRODUCTS

We need to decide what we want to invest in.  Shares, bonds, cash and structured notes are examples of the various types of investment products we can invest in.  Variety is the spice of life and it is so true when it comes to investing.  Hence, one should invest in various type of products.

2) CHANNELS

Once we have decided on the type of investment products, we then need to determine what investment channels to use.  We may decide to invest directly e.g. buying shares of a listed company or through a unit trust that invest in, say, bonds.  Or invest through a crowdfunding platform which seems to be “in-thing” these days amongst the tech savvy folks.

3) PRODUCTS WITHIN CHANNELS

And within each investment channel, we should further apply the diversification theory.  That is to say, if you are investing via the unit trust channel, ask yourself whether you want to invest in a few different funds that cater to different risk profiles so you can spread out your risk.  Or when buying shares directly on the stock exchange, make sure you spread your investment dollars across various companies. Or within a peer to business lending platform, diversify your investment to as many loans as possible.

Now, if you can achieve a balance with these three factors, I am pretty sure you will be in for a relatively smooth and successful ride as far as your investment journey is concerned.  Brings to mind the three-layered tea I love so much.

High risk investments when approached and managed properly can be turned into acceptable risk investments which yield attractive returns.  Take the world of peer to business lending for example. You invest in 20 different loans of $1,000 each at an average interest rate of, say, 12% per annum.  Assuming 10% of the loans you invested defaulted.  In a simple scenario, you will only have earned less than 2% return (not that exciting, right?) because whatever interest you have earned will mostly be negated by the loss of capital.  However, not every borrower will default on day one.  In fact, this is extremely rare.  If on average, defaults happen half way through the tenor of the loan, your actual loss of capital is only 5%.  Overall, you will still be up about 7% which is not a bad return for loan investments which is generally safer than equities.  By diversifying your loan portfolio, you would have averaged out what is reasonably high risk investments on a standalone basis into a group of investments that have acceptable risks, yet delivers attractive returns.

You can better manage investment risks by seeking out platforms that look at loans in a detailed, customised manner to ensure as much risks as possible are considered and mitigated.  This will enhance your rewards for the amount of risks that you take.  At Minterest, this is what we do best.

Granted, there is much more to say about the diversification process.  For example, we also need to take into consideration the investment time horizon, investment goals, tolerance to risk and how correlation between investments will determine the success of an investment portfolio.  But for now, I just wanted to share with you that the secret is not about another theory but applying a well-known theory into practice diligently.

As I am finishing this article and reminiscing a bit more, I doubt my grandma was worried about me dropping the basket and breaking the eggs.  I think she just wanted me to make more trips (only one basket, remember?) between the chicken coop and the kitchen so that I will get some exercise for the day.  You see, I was a little fat child, then.

Till next time, may your investment journey be a profitable one!

For more information about this article, how you can diversify your investments or if you just want to ask anything under the sun, please send me an email to [email protected] or visit us at https://www.minterest.sg

It is the journey and not the destination

Since I was young, I have always been passionate about classic sports cars.  I was particularly drawn by the simplicity of its design and its singular purpose, that is, to give its driver the pure driving experience!

A few years back, when the opportunity knocked on my door to acquire a 1983 German marquee, I did not hesitate and with the acquisition, I ticked one big item off my bucket list and kick started my midlife crisis too (according to my dear wife)!

Quickly, I learnt that there was more to it than just driving my old timer around and just looking cool (and with my back perspiring).  You need to know the “ins and outs of these cars, otherwise you will become your mechanic’s ATM! I started to observe my “seniors” and noticed that they have an instinct of sensing something is not right with their cars by just listening to the clanking of the engine and smelling the un-burnt fuel coming out of the exhaust!  I knew I had to roll up my sleeves and learn to troubleshoot and maintain my car.  Whilst it was a steep learning curve, it was also a natural process for me as I am very passionate about the journey through my pursuits.

One other thing that I am very passionate about is assisting companies in all aspects of their corporate borrowings (syndicated loans, debt restructuring, project financing, loans portfolio management, distress debt trading, leverage buy outs, structured export finance).  Unlike my classic car pursuits, I have been doing this for 20 odd years with several international investment banks.  So I dare that I am a “debt junkie” in a positive sense!

I can see some similarities in my journey in pursuit of classic cars and helping companies seek financing.  Let me offer two propositions from my vantage point.

Firstly, like classic cars, no two companies are the same and they will tend to also have its own identity, uniqueness and quirkiness.  Hence, you need to get into the details in order to understand each and every one of them.  You need to understand how its “engine and chassis” should be working together (one cannot assume they are) in order to propel them forward and keep them planted on the ground and not hit the kerbside.  The “one solution fits all” is not always the case when it comes to corporate debt financing.  Also, if one cuts corners in the evaluation process, the diagnosis will not be correct and even if the car or the company does not “breakdown” in the near term, it will not be able to live up to its maximum potential.  As we say in the classic car circle, “Good from far, far from good!”

Secondly, we need to be in a “community of collaborators” where we can tap on each other’s knowledge and strength.  Whilst I hang out at “Cars & Coffee” to meet the “seniors” on weekends, I would do exactly the same when I am in the office on weekdays with my two other business partners.  Each of my business partner brings a different experience and value proposition to the table.  I consult them every opportunity that I get to ensure that our clients’ interests are first served.

At Minterest, we come form the standpoint that each and every one of our clients are unique.  The funding solutions that we give them may be simple and yet bespoke.  We will take time to understand the needs of our clients through a robust due diligence process. We may have the wealth of experience behind us that gives us the instinct.  However, we will not be too quick to judge and to offer financing solutions until we fully understood their real needs.  Whilst getting the funding is the final destination, we are most interested in the journey.  Like the sheer experience of driving my old timer down a windy road in the wee hours of the morning, I want to give the same experience and smile on my client’s face at the end of his journey with Minterest. It is the journey and not the destination.

For more information about peer to business lending or if you just want to ask anything under the sun, please send me an email to [email protected] or visit us at https://www.minterest.sg.

Crowdfunding: Your questions answered

“Tua Pek, what do you do for a living?” my 7-year old niece asked me during our family’s Chinese New Year holidays in Vietnam recently.  I murmured something along the lines of helping companies borrow money.

“But how?” she followed up. Kids!!! They and their “why” and “how” questions.  But as the weeks and months rolled by, I continued to give her questions more thought and how I can answer all these follow-on questions in the simplest manner.

Most of us would have experience “crowdfunding” in some form or other in our lives – mainly when we were younger. I recall the times when I went around my neighbourhood during my student days canvassing for donations for causes such as a school project or for the Blind Centre.  It was hard work, walking tens of miles and knocking on doors. Little did I know then but it was “crowdfunding” at its very basic level.  These days, crowdfunding is “in” because of technology where on the click of a button allows one to communicate with lots and lots of people.  It has made sourcing money from the public, aka the crowd, much easier.  As they say, money makes the world go round and the power of harnessing the crowd to come together to finance something that each one of them believes is a powerful driving force.

Crowdfunding, as we know it today, is a very general term that is used to refer to initiatives that involve the raising of money from the crowd.  For example, it could be in the form of donations for a charity or for a good cause to help someone or a group of people in need at that particular point in time.  Or it could be to raise financing to develop a product.  Or to sell shares in one’s company to raise capital. Or to borrow money to fuel one’s business growth.

If you search online, one of the main definitions of crowdfunding is the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the internet.  The internet has made the world a much smaller place and hence, it is the simplest way of sourcing money from the public.

Crowdfunding started entering the consciousness of the Singapore public over the last couple of years.  This is especially so in the loan or equity crowdfunding space.  Since June 2016, anyone who allow companies to source financing from the public on their platform has to be licenced by the Monetary Authority of Singapore (“MAS”).  This is a good development as certain safeguards have been put in place to protect the investors as well as borrowers.  For example, the people that operate the platform has to be considered fit and proper by the MAS and that investors are informed of the risks and pitfalls of investing through such a channel.

When investing through a peer to business lending platform, for instance, you should take into account how the loans have been analysed, what factors may negatively impact the cash flow of the business and the capability of the borrowers’ management.  But before all these questions, the first question you should ask yourself is “who are behind the platform, how and what they have done to get themselves comfortable with the loans that are posted on their platform?”  As investors, we need to turn back the clock and be a kid again asking the simple questions of “why”, “how” and “what”.  Is investing through such channels risky?  It can be, but not necessarily so if you ask the right questions and diversify your investment portfolio.

At Minterest, we always ask ourselves this question after analysing various aspects of our borrowers’ business – “would we put our own money into this loan?”  If the answer is yes, the loan will be posted on the Minterest platform for our investors to invest in.  We believe in building relationships with our borrowers and investors that last so that both can meet their long term financial goals – that is why we are careful (or is it “choosy”?) on what loans can be posted on the Minterest platform.

I hope now you have a slightly better understanding of what crowdfunding is.  Investing through such a channel need not necessarily be risky if we become like a kid again asking the “right” questions and remember to apply the diversification strategy.

Till the next time, may your investment journey be a profitable one!

For more information about peer to business lending or if you just want to ask anything under the sun, please send me an email to [email protected] or visit us at https://www.minterest.sg

Welcome to Minterest – Our CEO’s Journey

A very warm welcome to Minterest and thank you for visiting our website. I am Charis Liau, Co-Founder and CEO of Minterest. It’s an honour to share my first blog post with readers, and I hope to share my personal journey and experience with you, as we embark on possibly the most exciting evolution of our generation, Web 3.0.

How it all started

I was nursing my 6 month old baby when the idea of P2B (Peer-to-Business) lending dropped into my head in September 2015. Having gone through a difficult childbirth, the experience left a profound gratefulness for the precious gift of life. Holding my precious boy in my arms, I often wonder about the possibilities, dreams and hopes that lie ahead for his future.

I thought of my many years of banking experience serving large corporates and institutions across Asia, providing them with working capital loans, long term real- estate financing and cross border structured asset solutions.

A major trend that I’ve noticed is that since the global financial crisis in 2008, there had been a gradual but definite systemic shift – SMEs are facing difficulties in raising funds from traditional finance providers.

Having to adhere to stricter lending criteria, higher cost metrics and added regulatory and compliance requirements, banks had been forced to cut back from their role as the traditional provider of credit to these companies. The resultant difficulty in securing credit has had a dampening effect on global economic growth.

At around the same time, I was helping a local small business raise funds for its business. This company was looking to raise USD 5million. It had a business plan, strong financial projections and a promising future. However, not many people knew about it, and the company was unable to secure bank financing due to a lack of historical financial credit history.

Building tomorrow’s financial eco-system –  one that serves rather than rules.

Together with Ronnie (Minterest’s co-founder), we established Minterest in March 2016 with the bold ambition to build a new financial eco-system in Singapore. As former bankers with deep experience in corporate and structured finance, our aim is to empower businesses and investors to enable them to reach their financial goals. This was confirmed by a study by VISA and Deloitte highlighting that 40% of Singapore SMEs have no access to bank loan financing. It is alarming as these SMEs contribute 47% to Singapore’s GDP and employ 70% of our Singapore workforce.

3 Simple Minterest Difference

We set ourselves apart from other financing solution providers through our three key differentiators :-

  1. For the Borrowers – we bring our banking experience and structuring capabilities honed over the years serving large corporates to the small & medium enterprises, “turbo-charging” their businesses so as to accelerate their future to the present. We understand that no two businesses are alike and we offer customised solutions to every borrower.

  2. For the Investors – we deliver to them a broad range of diversified loans which has been vetted through our due diligence process. We do not post every loan that comes our way. We question the use of funds, and more importantly, the source of repayment for every loan. Where required, we will take additional security (e.g. pledge over assets, assignment of cash flows, credit insurance etc.) to further enhance the security of the deal. I believe we are the first in Singapore to offer this.

  3. To our other stakeholders – Minterest is built on a foundation of integrity and good governance. Duty of care to our stakeholders is at the centre of what we do at Minterest. Our values drive proper risk management that influences every aspect of our businesses. Being regulated by the Monetary Authority of Singapore, we are subject to robust business governance, and compliance in ensuring that we deal fairly with our customers.

What does our future look like

Someone recently said to me, “For the first time in history, we do not know how banking will look like in 10 years’ time”. And I agree. Looking at my boy (who recently turned 2 years in March 2017), I can’t help but wonder in what shape or form banking will evolve into when he grows up. Will he still need to walk into a branch to open a bank account, fill up lengthy application forms to apply for a credit card, invest only in public listed shares and bonds, or will all these be disintermediated through smart innovations that bring seamless, convenient, on-demand banking and investment experience wherever and whenever he needs them.

As for me, I’m thrilled and extremely excited to be a part of his future, building a new financial eco-system that will hopefully, one day, serve his generation effectively in time to come.

For more information about peer to business lending or if you just want to ask anything under the sun, please send me an email to [email protected] or visit us at https://www.minterest.sg.