How do family offices invest?, with Stephanie Leung, Group Deputy CIO and Head of StashAway Hong Kong

Episode summary

Stephanie shares her journey from the trading desk to investing for family offices.

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Episode transcript


 

Philipp: Welcome to another episode of in your best interest, your personal finance podcast. With us today, Stephanie Leung. Stephanie Leung is the Head of StashAway Hong Kong and Group Deputy CIO. Stephanie has more than 17 years of experience in managing multi-asset portfolios globally for Goldman Sachs, as well as for institutional investors and family offices. Her expertise in global macro and quantitative investing has enabled her to effectively manage multi-billion dollar portfolios for her clients. Prior to finance, she began her career at McKinsey & Company, advising companies in the Asia Pacific region. Stephanie earned her Master's in Computer Science in Artificial Intelligence from Stanford University and a Bachelor of Science in Computer Engineering from the University of Michigan. Welcome to the show Stephanie, how are you?

Stephanie: I'm good. How are you, Philipp?

Philipp: I'm very good. And I'm very excited, obviously the listeners as I said you're working with me at StashAway, so we've known each other for quite a bit. But obviously more on the, since we never met in person due to COVID, more on the work side of things. 

So I'm really excited actually to get to know you a little bit better, more from a personal standpoint and kind of like walk a little bit through your career and see how you ended up at StashAway and what you think about investing in general, [02:00] which will be super interesting for our listeners to learn from someone that worked in that industry for so long, and in different ways such as institutional investing as well as with family offices, which we haven't really discussed yet. 

We've done private equity, right? We have done VC investing, but we really didn't effectively talk about family offices yet. So I'm very excited about that.

Stephanie:That's great.

Philipp: What I always ask everyone on the show is, what did you do with your first paycheck? Because it is a personal finance podcast. So what was kind of like the first paycheck or the first time you had an experience with money. Like maybe it was like the first time you got an allowance from your parents or something, right?

What was that something that maybe made like an impression on you when it comes to personal finances?

Stephanie: Yes, actually, I mean, that was actually a great question because it actually relates to my first experience with investment as well. So I remember when I was maybe about 6 or 7 years old, my father used to have an Apple computer. Like back in the days, this was in like the 80s, so it was an Apple II. 

This was when the keyboard was still attached to the computer, so it was one thing. And he had this program that he asked his brother to program because his brother is a programmer that tracks like stock prices. And they've developed some sort of algorithm to actually generate trading signals, like when to buy, when to sell etc. And then he needed somebody to enter the daily prices of major stocks into the computer.

So that was actually my first job. My first job was actually to take the newspaper at the end of the day every day, at, let's say, after my school around 6 o'clock before dinner and manually enter stock prices, like ending prices for the list of stocks that he tracks.

Philipp: Oh, that's awesome.

Stephanie: Yes. I didn't know what I was doing, but I was really intrigued. I loved [04:00] anything that had to do with computers or electronics, and then, I guess, that's how I developed my first interest into stock market investment.

Philipp: Yes, super easy. What age were you at that time, you said?

Stephanie: I don't remember, like early junior school, so maybe it's 6, 7 or 8.

Philipp: Wow, OK, long time, super interesting. So you got an early experience there in investing; that's the first one that someone mentioned, so that's super interesting.

Obviously, then you go to university, and you studied computer engineering and then computer science in your master's. So how did you not go straight for finance if you already had that experience and you were intrigued by it early on? So what was the process like in making that decision to be going for engineering and going overseas to the US?

Stephanie: I had quite a lot of different interests. I actually thought in university.. I actually thought about doing either computer science or business because I had an interest in finance and business. Or, actually, something that's quite different. I was thinking about doing architecture. So I loved playing Lego, I just loved building models.

 And I had to choose between the three, and then I consulted people, right? I was very lucky to have met somebody who was in an architecture firm. And I mean what he told me was, I mean it's fun, but then you have to draw like doors for 10 years before you can draw windows, and I was like, oh really. And then I thought about, kind of, the reason why I love computer programming is because I can build something very easily and quickly without needing a lot of resources. 

So I thought, OK, finance/business, I can probably learn on the side. [06:00] But computer science programming is what I was really passionate about. And building something on a computer is so much easier than building something using brick and mortar. 

I actually studied computer science both as an undergrad and in my masters. In fact, I was actually specialising in AI when I was doing my Master's at Stanford. That was in the year 2001, right? Way before, AI had become where it is right now. Where it's applicable to many different fields, and you have like all these breakthroughs in AI. 

So back then, I was actually learning natural language processing. I was trying to develop like some sort of; I remember one of my internships was actually about developing a phone answering system that could let people play games and sort through them. So I mean, AI was very preliminary. And then I think it was the, so when I was at Stanford, I did like during the last summer, I did an internship in Japan. 

And the moment I stepped out of the plane, I felt like, oh, I'm back at home. Even though I wasn't in Hong Kong, it was just Asia. The air felt Asian like the air felt like there was energy. Of course, being in California was all fine and great.It was a great life, but it felt a bit slow. 

So I decided the moment I stepped in that Tokyo airport, I decided that I needed to come back to Asia. Because if I have to start my career somewhere, I mean Asia is the place to be. So then I try to look for things to do while I have to return to Hong Kong. 

And frankly speaking, as a computer science major back then, there weren't that many choices. I spoke to my friends in banks, and there were plenty of jobs, but a lot of those are not frontline jobs. [08:00] I wanted to; I knew that I wanted to be frontline; I want to be creating something. And I didn't want to be, I guess, middle office or back office. 

So one of my friends actually introduced me to McKinsey; he was like, oh, there's this consulting company you may want to try, they are hiring. So I was like, OK, fine, I'll go to an interview. But then luckily, I got into McKinsey, and I started my consulting career there. Two years afterwards, I really thought that I needed to focus on one domain. And I felt like because I did computer science already, finance/investing is the other passion I have, which I didn't have a chance to explore. So again, through a friendly connection, I got introduced to the Goldman Sachs Strategy Group in Asia. And got a job there and started as a research analyst. That's kind of how it all started.

Philipp: How you got into the financial industry, yes, super interesting. And I think this is where we obviously want to kind of focus on today as well, because after being an analyst, I know you're also a trader, right? So maybe we can actually start there. Because being a trader is something completely different than being a Deputy Chief Investment Officer at Stashaway, right? 

So that kind of like shift from being a trader to being a long-term investor, that went on for many years, right? And so I think for people on the podcast, it is probably very interesting to also see the trading side, and then what made you come over. So maybe we start by exploring a little bit what life was like as a trader now in Goldman Sachs. Like, what did you even do?

Stephanie: Yes. Now that I think about it, that was over 10 years ago. I was actually in my late 20s, and it was actually a very interesting environment. So we're all on like a trading floor, [10:00] with rows and rows of tables. We're sitting kind of arm to arm next to each other; my MD, who was my boss, was actually sitting right next to me. Every morning we had to go into the office by 6:50am, and I mean, they were very strict on time, right? I remember being late for one minute one day, and I had a really bad day. My boss was pretty harsh to me about being on time. 

But anyway, we start the day at 6:50am and then we would have a traders meeting, talking about what happened the night before. Like how our P&L's have changed overnight etc. And then we also have a sales meeting, where the whole floor kind of talks about what we're going to tell clients about today, what are some of the research topics that are of importance. 

And then we start the day basically trading, right? Hong Kong starts, so I was actually trading the Hong Kong-China portfolio. So what we did, we were the so-called prop desk in the bank, and we basically managed the bank's equities positions - number one to facilitate client flows. 

So if a client wants to buy and sell, we take the other side of that flow. Let's say a client wants to sell something, sell some stocks, but they don't want to sell in the market. So they come to our desk, and we would give them a price, like I'll tell them oh, for that amount of stock, sometimes it's not very liquid for some stock, so it's a very large quantity that if they offload, it would impact the actual share prices. 

So they'll come to us, and I will give them a price, and I will take the stock. And then we'll try to also find the other side, try to find a client, who's willing to buy from us. But we being a facilitation desk, we facilitate the trade. And to facilitate this trade successfully, [12:00] of course, I mean we take the spread. But also, sometimes we have to take risk positions overnight or over a period of time. So then we have to take a position on how we think that stock or that particular instrument will perform during the time that we have to hold it, or long it or short it. 

So that involves kind of having views on markets, having views on stocks, and then also a part of my job was actually to manage just the firm's own money, right? Because we also are assigned a block of money that we need to make profit out of. So that was actually my first, I guess, professional investing experience, but it was very short term, right? Sometimes we hold things for a few hours; sometimes, we hold things for a day and for some positions. I mean, we can hold for like weeks, right? But every day, actually every hour, I remember there was an email going around the whole floor, telling us how the P&L was for each trader.

Philipp: So very competitive too.

Stephanie: Yes, it was actually very high pressure. Because your boss and your peers, and even your subordinates, your analysts actually see all the P&L's for everyone.

And sometimes, I mean in the short term, the fluctuations are hard to estimate. It's actually a random walk in my view in a very short run. But by then, you have to manage these volatilities.

So then, risk management actually became very important, and I think that's kind of where I learned about risk management. It's a very strange job, right? Because I think there aren't, I mean most of the jobs you start your day, you go in; you put in hours.  [14:00]

You know you're adding value, right? You know you're adding value to the company; you're adding value to society or whatever, right? But being a trader, you never know at the start of the day whether by going into work, you're going to create value or destroy value. And of course, I mean you make money some days, and you lose money on some days, and on the days that you lose money, you go home feeling like, oh, I actually shouldn't have gone to work. 

By not going to work, I actually wouldn't have made that wrong decision; I wouldn't be destroying value. But yes, there were a lot of decisions that we needed to make, and I mean obviously some of them were good, some of them were bad. But yes, and actually, I think at the end of the day, what it taught me was, it was extremely difficult to make money in a short-term trading environment.

I think what's sustainable, what's more, sustainable for that experience at least was the longer-term positions, or the more fundamental research that we had time to do, that allows us to take the right risk, i.e. when we have the right view, and for example is against consensus or allows us to take on a big position, then I mean those are things that we made the most money on. 

But most of the time, I still remember there was one trader who, in the morning, he would go in, put in two trades. One is the buy trade; one is a sell trade on HSI futures. Every morning, I don't know what the rationale is, but I mean, he's basically trying to capture the spread, right? If there's like a fluctuation, he captures that spread. But at the end of the day, does that make money? No. So yes, I think it was definitely a very interesting environment.

Philipp: Very interesting environment. [16:00] And then obviously, you go from trading then, right? Being a trader at Goldman Sachs, to becoming an entrepreneur and a co-founder by starting a hedge fund, right? So what was that mindset? Why did you leave? Because Goldman Sachs obviously everyone, that's like if you're in investment banking and trading, that's kind of the pinnacle of where people want to be, right? So why did you just decide to go out on your own or with a co-founder, so obviously with some partners, to start a hedge fund? And yes, what was even the strategy then inside the hedge fund that you were pursuing?

Stephanie: Yes. I think I always say that in my 30s, 30 years old, 31. I was probably too young, too foolish. But I guess I mean when I think about what happened, so I was actually going into Goldman every day working as a short-term trader, right? 

One day I just found that I wasn't interested in the job anymore like I lost my passion for it. Because I think at the time, I mean Goldman was also transitioning from a proprietary-focused firm into a more agency-focused firm, i.e. we were trying to do a lot more sales work than risk management work, investing work for me. 

And I went into the role being super interested in investing but not so interested in selling. So I was finding that if I had to spend like 70-80% of my time like being in sales like that's not what I enjoy. And then there was this opportunity from, I guess, a family office that wanted to invest in a hedge fund that me and my colleague were trying to stop. 

So our idea was that because if you look at a hedge fund, I mean for people who are not familiar with hedge funds. What hedge funds do, [18:00] there are many different strategies. One of them is called equity fundamental long-short, i.e. you take, let's say, 40 different positions in different equities. Some of them are long positions, some of them are short positions, and you try to hedge out the market risk by going long and short at the same time or varying your like long-shot ratio. 

It's one of the most popular strategies in the hedge fund world, and I mean, people charge a lot for it, right? There's usually like a 2% management fee and then 20% performance fee. So hedge fund managers, if you're good, you actually make a lot of money because it's a very steep return.

Philipp: Yes, you always hear the stories, right? About the hedge fund manager, like kind of running the world, right? So yes, when it comes to the finance world because of those fee schedules, right? Because they're still making that 2%, and if they're doing well, they're making a lot of money, right?

Stephanie: Exactly. So I mean, that was the allure of starting my own hedge fund because I captured the whole upside, and also I can focus a hundred percent on investing. And not having to deal with, I guess, the... Actually I had to do the fundraising part, and that was actually the hard part. 

But unlike working in Goldman, I didn't have to do the daily meetings that start at like 6:50am, I didn't have to do the sales job et cetera. Actually, a little bit, I know I had to actually do more sales jobs than before back then. 

And then also there was this opportunity that came by like somebody actually wanted to invest in our hedge fund, which we had a novel idea. So we wanted to do a top-down macro-based hedge fund that invests in equities. So it was quite different because most of the equity long-short funds are bottom-up, i.e. the fund manager would pick each individual company based on the companies’ fundamentals, financials like they meet with management etc. [20:00]

So the hedge fund that we wanted to start was actually a top-down hedge fund because I'm from a macro background when I was doing research, and then also my co-founder was also an economist. So we have this idea that, or we have done a lot of studies showing that most of the returns actually come from having the right macro view, having the right top-down view. 

So we wanted to start a hedge fund where we drive the investment decisions from top-down. But then we express it using stocks, i.e. for example, we're in an economic recovery, and we wanted to go along the cyclical sectors of the market. So in the cyclical sectors, we pick the stocks that are early cycle, right? 

We've picked a few of these, and then we go short on some of the interest-rate sensitive stocks, let's say in utilities, right? That way, we can actually express our macro tilt using a long-short equity allocation. So that was the idea, and then a big investor in mainland China found it to be very interesting, so he said, OK if you guys start this, I'll fund it. 

The month that we started it, so after we got everything set up, the money actually never came. And the investor said, oh, I actually couldn't travel, my son can't travel to Hong Kong as well, so sorry, but I can't fund this. So we still ended up starting a hedge fund, but with like most of the friends and family money, and we were trying to raise money along the way. 

And having to actually manage a portfolio, running a startup, and then also trying to raise money at the same time with only two people, that was extremely difficult. It was extremely humbling, right? Because in Goldman, in a large organisation, everything is taken care of, whereas a startup, you have to do everything. [22:00]

But we did manage to get a lot of support from our friends and other banks. So I mean, we actually ran the hedge fund for about two years; afterwards, my co-founder decided it was, sell-side was actually going back to a bank, was more for her career. So she went back to becoming an economist. I then went on to actually start a multi-family office with another ex-Goldman colleague, who was trying to, I mean, start her own venture with some very big family offices in Hong Kong.

Philipp: And that's super interesting; thank you for explaining this. Because I think we also never really talked about the hedge fund world yet on the podcast, so that's a very good entry episode. 

I think we can almost have another episode on the hedge fund world. But yes, you mentioned already, so then you move over to a family office, right? And then now obviously a family office, less trading than at the hedge fund, even much less trading than as a Goldman trader. You're slowly starting to get into that investing more long term and things like that. So how is the family office different from your Goldman Sachs and hedge fund experience when it comes to investment strategies?

Stephanie: Yes. So I worked at a multi-family office, as well as a single-family office. So a multi-family office is basically a company, an asset management company, where several, I guess families, pull together the assets for the asset manager to manage. Single-family obviously is just one single family. 

I think there are a few things that are common that I see among these family offices, right? Number one is that they focus a lot more on asset allocation rather than trying to capture every market ups and downs. [24:00] I mean, we would, at the multi-family office, give updates to our client's maybe every month or, for some clients, every three months.

Philipp: When you say multi-family, how many families were in that family office roughly?

Stephanie: So in our multi-family office, there were about 6 to 8 families.

Philipp: Six to 8, OK.

Stephanie: Yes. A lot of them actually are businessmen in Hong Kong who are in traditional or property businesses, so these are big family offices. But I mean, every month or every 3 months when they review the portfolio, they're always interested in hearing, I mean what the macroeconomic environment is. Because for them, that is the first driver. They're not as interested in finding, let's say, I mean the next stock that will triple or even quadruple.

Philipp: Do you think more so in family offices, is it more wealth preservation at that stage?

Stephanie: Yes, I think that's one, of course. Obviously, when you already have a huge amount of money, you're looking for stable returns; you're not looking to, I guess, become super-rich anymore. I mean, having said that, there's obviously a range of risk tolerance. So I mean one very popular strategy among the family offices or the higher risk ones is to leverage, to buy bonds, right? 

I mean, you buy a high yield bond. I mean, it also plays to your strength as well, right? For example, some family offices which are very deep into the Chinese property sector because they know that's a network. 

They are very comfortable buying these Chinese high-yield bonds, which are by returning 6% to 8% per annum, and leverage that like two times, for example, to get 15% return. Because they feel that they know [26:00] everything about that company. 

Now, of course, I mean like a lot of investors, myself included, I don't have that access to those like tycoon levels. So when I'm not that comfortable, that is a different risk that I have to consider. So I would say, I mean back to your question, Philipp; I think yes, to a certain extent, I mean they're looking for high single-digit returns mostly. But they're also looking for sustainable returns, right? It's like single-digit returns year after year after year. 

They are also very mindful about drawdowns. So when they think about risk, they think in terms of the, I mean, the maximum drawdown that they can withstand. I remember when I was working for the single-family office, actually they had a previous investment team, and the problem that they had was there was no defined risk limits, i.e. for example, when they were thinking about the equity allocation, it could swing a lot. 

It could swing anywhere between, let's say I mean +50% to -30% of the portfolio. And that created a lot of discomfort with the family because they didn't know what kind of risk they're taking, right? They didn't know what the parameters were. Like think about my drawdowns, where is my maximum? Like how much more money, I'm losing money, how much more money can I lose? 

So the first thing that I did when I started working for that single-family office was to create a strategic asset allocation plan. So when we think about asset allocation, there are two types. Strategic, which corresponds to your risk, which is pretty much like what we ask our investors now at StashAway, a StashAway Risk Index. 

And then using your risk parameter, so that was actually exactly what I did. I asked the family what is the maximum drawdown [28:00] that you can withstand in a bad scenario, and then they gave me a number, they gave me a percentage. And I worked backwards to optimise for them; of course, they gave me some other constraints as well. 

For example, we had some private equity allocation; we had some hedge fund allocation. So I mean, let's say we wanted to still retain like 30% in liquids alternatives, then I mean we have 70% allocated public securities. That includes bonds, equities, commodities, REITs etc. So then I worked back to optimise for a strategic asset allocation for the family given the risk. That strategic allocation doesn't change unless the family's risk appetite changes. So we will review it every year to see if the family needs have changed or if the risk appetite has changed. If not, then we keep that strategic asset allocation. 

And then, on top of that, we will have a tactical asset allocation. Which is actually very similar to ERAA®, which we have right now. And the tactical asset allocation corresponds to changing macroeconomic environments. 

And we will allow for swings from that strategic asset allocation to correspond to the changes in the environment. So, for example, let's say we agree on a strategic allocation of equity of, let's say, 20%, right? And then within that 20% +/-, let's say 5%, we allow for that deviation given how we think the forward macro-environment would be, and that makes up the tactical allocation. 

Then the next step is to look at each bucket; let's say I mean equities. What are the different sectors, ETF's, securities that we invest in? If you have a big family office, [30:00] like the single-family office and multi-family office that I was running, had about, I mean, 6 to 8 people in the investment team. 

Then I mean, we have the resources, right? So we can have people looking at specific securities. Let's say I wanted to have 5% in US technology. I had an analyst that could drill into the companies and pick the stock for me.

But an easy way to do it, of course, is to use ETFs. I would say frankly, I mean the difference may be 20%, but having that sort of asset allocation risk framework in mind, that's a holistic way to think about a portfolio.

Philipp: Absolutely. So if I took it a step back and actually said OK, you did like the public markets part of the family office, right? But let's say a family. Usually, business owners, or you said, make money in real estate, right? 

Do you also then have a meeting with, because, in the family office, that's part of the family office, right? They look at everything the family does. From taxation, tax strategies, estate planning to equities. But maybe, like you said, they might have 90% of their net worth still in the family business or in real estate if that's where they make their money. 

So did you look from that level and look at diversification as a whole? For example, what I like to do is when I do financial planning with clients on a one-to-one basis or with the family; I like to look at everything from the top. And then say, hey, I'm not a specialist in real estate, but you can have one of your real estate stuff. But because a lot of times, people are overly concentrated on what they're good at, right?

Stephanie: Yes, for sure.

Philipp: Startup employees, like right place, right time, having a lot of stocks in one company, getting more shares every year by bonuses, right? Or they’re real estate investors, like 90% is real estate. [32:00] But is that something why the families also then employ you? And like how much does that factor in, right? Because you can have a drawdown on the public market side, but maybe the other side is up, right? So how did you guys manage that?

Stephanie: I think that's a great point. Of course, it differs from family to family, right? But that goes into the strategic asset allocation as well. So there were things that we would not invest in because, let's say, the families heavily invested in property, so they don't want to be invested in property anymore in their investment portfolio. And we set that out clearly when we first start the engagement. 

On the other side, I mean, there are families who just want to invest in property, right? They just wanted to have all the assets in one sector because they feel like they know the network; they know what's going on. And there's nothing much that you can do about it, right? You can advise them all day that, oh, you should diversify. But if they really know what they're doing, then I mean that's how... I guess it also relates to the difference between the first generation and the second generation as well. 

When I was working with second generations, I think they're much more well-trained in finance. They're much more well-trained in sort of understanding portfolio theory. The benefits of diversification. So they tend to have a more portfolio type of mindset, right? They tend to think more about, oh, if I'm already taking so much risk in my business in, let's say, food and beverage, do I still want to be investing my public portfolio in food and beverage. 

What I've seen is like the second generation likes to diversify. In their private equity investment [34:00] or in the public equity investment, let's say a lot of them are interested in investing in tech, because at their, I mean, their family business is completely different. 

But for the first generation, they have a slightly different mindset because they were the ones that basically made the whole fortune from one thing that they're very good at. So they didn't make the money from a portfolio perspective, right? For the business, they really put, I guess they invested 100% of the time and money into it, and they succeeded. 

Which is why, given their background, they were much more comfortable with staying with what they're good at. But I would also think that there's a selection bias here because I mean these people are successful, of course, because they're good at what they've done, they were at the right place, at the right time. I'm thinking maybe for 100 people that are, like for many people that have done the same thing, probably only one. 

Let's say 1 out of 100 would have succeeded and become the first generation of the head of the family office. There are many others who were too concentrated, put all the money and sweat into one thing, and did not succeed that I never got to meet. So I guess yes, that may be a kind of slight difference between the people who have made it as a first-generation and people who are trying to, I guess, be a bit more prudent and be a bit more conservative. But have a bigger chance of succeeding or maintaining their wealth.

Philipp: Absolutely. So then you’re in a nice job, right? Running a family office as a chief investment officer, right? What did you make then completely pivot your career again, and go into probably a nice paying job to [36:00] a startup like StashAway, like? How did that come about?

Stephanie: So yes, this is another pretty interesting story. I always think that if I think back in life, there are many things that happen, and everything happened for a good reason. So I actually left the single-family office in 2019, I was actually turning 40 at the time, and I thought to myself. 

Actually, I love snowboarding, and I actually co-founded a ski school, a snow sports school in Niseko, with an ex-colleague from McKinsey. So I was thinking maybe it's a good time for me to take a break in my career and spend half a year in Niseko. Like, I've never had the chance to really refine my snowboarding skills, so it'll be great. And then also we can kind of run the school together in Niseko for about 6 months. And I could travel around the world like skiing in Whistler, and then maybe stay a few months in Europe as well.

I mean, staying in a place for a few months is always something that I wanted to do. So it was the year 2020, March I was actually snowboarding in Whistler, and that was in the third week of March.

Philipp: Which is a beautiful place.

Stephanie: It was a beautiful place, yes exactly. But they had to shut it down because of COVID-19. So I actually bought my tickets, came back to Hong Kong, and I was put into home quarantine for two weeks. I think by the eighth day or tenth day, I thought to myself, oh actually, I mean, this is not looking good. 

Because I think COVID is going to stay with us for a long time, and my plan was actually not going to work out. So then I mean I started pinging with friends again, and like just seeing what people are up to, and if there's anything, I can like help with, like while I'm stuck in Hong Kong. 

So a very good friend of mine who works at BlackRock [38:00] wrote back, and he said, oh, actually, I'm interested in meeting with this Fintech startup in Singapore. I think they're looking for somebody to start the business in Hong Kong; I think you guys may have a good match. So I was like, OK, yes, this sounds interesting. I mean startup is, obviously I tried to start up my own hedge fund, I started a school, so a startup is something that I've always wanted to do, and always been interested in doing. 

And I thought to myself, why not, right? It's so easy. It was a Zoom call because, I mean, I didn't even have to change my shorts. I could just put on my suit, and here I go, like a job interview. So I met with Michele, who's our CEO, and I think instantly I felt like I found my next move, like my next mission in life. And then, of course, that one Zoom call turned into many other Zoom calls with the C-Suite at StashAway and also other people at StashAway. I remember we were still like actually below 50 people back then; now we are, of course, over 170.

Philipp: Yes, I know, crazy growth.

Stephanie: Yes, crazy growth. But I felt that number one, to me, people is the most important thing inside of a company, right? Because your strategy can change, your products can change, but then the people wouldn't change. And everybody I met with at StashAway, number one, had the same goal. Like we share the same value of really trying to empower people to build wealth over the long term. 

And that actually echoes with my values very well. And then secondly, the company is super transparent; I would say that in all the companies that I work for, I've never come across a company like StashAway. Like the way that we communicate, the way that the whole management is so humble [40:00] and transparent. I think it's very unique. But anyway, after many Zoom calls, I joined StashAway and decided to, I mean, stay in Hong Kong for the company.

Philipp: Yes, and we're very happy to have you, of course. With that being said, though, all of this experience that you have, and all these different companies, different jobs you've done, everything in investing, and some management consulting, of course, right? 

But what are some of the biggest takeaways and lessons that actually shape your own personal investment? This is a personal finance podcast, right? So people always look for opportunities or ways to refine and better their personal finances and their personal investment strategy. So how does this all shape yours, and how do you set up your portfolio nowadays?

Stephanie: Yes, that's a good question. I think actually one thing that, I would say one thing that I wished I learned when I was 24 or 25 when I first started out was to think about long-term investing in terms of compound returns. Like the power of compound interest. Because back in, I was actually having, just having this conversation two days ago with another ex-Goldman colleague who's now semi-retired. 

And I was talking to her about compound interest that we, I mean we preach at StashAway every day. I was like I wish that when we started, I mean actually somebody at Goldman would have taught me that if I just make like let's say 8% return a year, and consistently make that for 20 years, I mean I would have quadrupled my initial investment, nobody told us that, right? We were just focusing on, OK, making money today, and like thinking about, oh, making a lot of money in a very short time, because [42:00] bonus was what everyone cared about back then. 

Like it was the good old days when your bonus would really make a difference. And then my Goldman colleague was like, yes, like nobody actually taught us about compound interest. And if I think back, if I just started, like, a good kind of investing habit of regularly doing it, regularly - just I mean - investing and saving systematically. I mean by systematically, I mean not necessarily using an algo, but having a habit of consistently investing. I would have made; I guess I mean even much more than I have right now, because of the power of time.

Philipp: What did you do with the money back in those days? Did you start investing that in real estate? Did you save it? Did you spend it? Maybe a mix of everything. Or did you start trading on it because that's what your job was? So how did that change then?

Stephanie: I mean, to be honest, so at StashAway, 50% of our users are from the financial industry, right? I think there's a good reason for it. Because when you're managing money for others, you actually don't take good care of yourself.

Philipp:  Yes, I’ve seen that too many times. Plus, it's also very painful right, one of the problems I always face it's like, even if you want to put in a trade, it goes through compliance; it takes forever, right? And it's not a nice thing to do. So if you just have it, like an ETF where it doesn't have to go, like a managed strategy, it's so much easier, right?

Stephanie: Yes, exactly. I mean, it's so easy to just kind of put it away, make excuses, and not be just disciplined about it. Because I mean, at the end of the day, you get so tired of managing money for other people. And then also there's this mindset oh, I'm going to make a lot, [44:00] I'm going to make it back so I can spend it. 

And I don't really have to think about the long-term plan, because I'm so young. What I didn't realise is that if you don't start young, I mean that time that your money can work for you is gone forever. So I mean yes, this is also, I mean we have a very young company, right? The average age in our company is like 27-28, so this is something that I would love to speak to all of our employees as well. Like thinking about your money early on, have good habits.

Philipp: And then let compound interest do it's work, right?

Stephanie: Yes, compound interest is the most powerful thing in finance, and it's so under-appreciated. I mean, it's like, I remember in 2007, well you asked me like what we're trading, right? I was actually, yes; we were trading warrants within the investment team. So my boss was actually buying warrants, and he told us, oh, why don't we, like you guys, can look at these warrants as well. 

I mean, obviously, I made a very large amount of money in a very short time. But then I mean I lost a lot of money as well in a very short time. So that was 2007. And the other thing that, although the other thing that he said to me which I still remember today, is that when you're early in your career, I mean trading on your personal account (PA) does not make a big difference, it's really about investing in your own career. 

Of course, I mean being the boss, like there's an agenda in what he was trying to say. But if I think back, it is correct as well. Because investing in yourself, investing your career, and then having a good habit of investing. I think that would really accrue over a long period of time. 

And I mean, I mean I started ultra-marathon running when I turned when I was 31, 32 [46:00] right when I was starting a hedge fund. I think that has a lot of parallel with investing as well because investing is not a sprint, right? It's a marathon or is actually an ultra-marathon, requires a lot of focus, a lot of discipline, and really finding what's most comfortable for you. I mean, everyone is different, so you have to find a way that works.

Philipp: Absolutely, I think that's super valuable advice for the listeners. So thank you for sharing that, Stephanie but I do have one more question. And you talked about a few of the things, but do you have any other practical tips for having a successful career, right? So how do you keep focused? Any tips that you want to share with the audience before we wrap it up?

Stephanie: Yes, I guess I'm super; I'm like a super geek on productivity. So I try to optimise my time all the time. So I think I have some tips, right? I mean, having a routine, I have a morning routine to make sure that I start the day right. You have to start the day. So every day is important, because every day makes up your life, right? 

So I will try to make sure I start my day in my best possible mindset, in my best possible shape. I run a lot. So I do all my exercise in the morning. I have my morning routine just to get my mind in the right frame. Because as the day goes on, your willpower actually decreases. Which is why also I mean you hear things like eat the frog in the morning, which is correct because, at the end of the day, I just want to kick back and have a nice glass of wine.

Philipp: Yes. Especially during COVID, right? This has been so difficult. And having a schedule, but if you're just at home, having a schedule is so important, right? And having, it's still your routine in place.

Stephanie: Exactly. And then also prioritise, because there are so many different things that we're trying to do in life. [48:00] I mean, I'm a good example; I think I have a lot of different interests and a lot of different things I like to pursue. I've actually tried to keep myself to limits. 

So, for example, like every day, I only tried to complete three goals that I set for myself, so I don't get distracted. Because I'm a person that gets easily distracted. And then I mean just, I think also focus on prioritising things, also focusing on some of the most important things in life, right? Because I think a lot of people try to push themselves to do things that they don't enjoy. Sometimes it's necessary like. When I'm training for a run, I need to push myself to the level where it's slightly painful. But I think what's most important is that you understand. I mean, why are you doing it? Because if the why is very clear, then you can go through the pain, right? Then the pain is worth it. 

If you don't know why then maybe don't force yourself to do something that you don't like to do, right? Or find other ways. And then there are a few things that I don't compromise on. I don't compromise on my exercise time; I don't compromise on my sleep; these two are the most important. I also eat quite healthily. So I mean just some tips, because yes, as you get older, I mean you need to kind of maintain your personal hygiene.

Philipp: Absolutely, super good tips.So that's awesome; thank you so much for sharing this, Stephanie. And to the audience as well, hey, if you want to connect with Stephanie, I know she's also active on LinkedIn. So connect with Stephanie. If you want to learn more about StashAway and what we do in Hong Kong, also feel free to reach out to Stephanie and the team over there. We have AMAs all the time. And if you want to learn more on the investment side of things, actually myself, Stephanie, and our Chief Investment Officer Freddy Lim, [50:00] we have a separate podcast which is our market commentary, on twice a month. So we will put the links into the show notes below as well, so you can listen to that as well if you want to have a more investment-focused, more up-to-date show. 

With that being said, Stephanie, again, thank you so much for being with us. 

Stephanie: Thank you so much, and have a great day.

Episode notes

In this episode, Stephanie shares the investment strategies behind family offices, how she managed a hedge fund, and why she left the trading desk.

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Also, our lawyers would want us to tell you that the opinions of our guests are not necessarily shared by StashAway, that past performance is no guarantee of future results, and that what you heard is not investment advice.

Episode contributors

  • Philipp Muedder (Head of Financial Planning at StashAway)
  • Stephanie Leung (Group Deputy CIO at StashAway)