Francis Koh

Corporate Divestitures and Spinoffs in Singapore

This paper discusses the different forms of corporate divestitures, the motives for this corporate activity and the empirical findings about their economic outcomes. A sample of corporate divestitures is also used to identify the main motivations in the Singapore context. We conclude that divestitures are carried out to achieve operational efficiency, gain incremental profitability and liquidity. Using share price data around the event-dates, we show that announcements of divestitures generally lead to significant increases in the returns of the parent company. The positive abnormal returns are related to the relative size of the divestitures and the computed accounting gains. Overall, corporate divestiture is a value-increasing activity for Singapore companies.

MARKETS AND INDUSTRY — VENTURE CAPITAL AND ECONOMIC GROWTH: AN INDUSTRY OVERVIEW AND SINGAPORE'S EXPERIENCE

This paper provides an overview of the venture capital industry and its development in Asia and Singapore. Venture capital plays an important role in innovation and economic growth. Indeed, the resurgence of the United States as a technology leader is intimately linked to the success of Silicon Valley. As Singapore enters the next phase of economic development, the creation of internal engines of growth is an urgent task. The Singapore government has done much to provide an environment for entrepreneurship to thrive. Its success at replicating the Silicon Valley culture will be important for Singapores future economic success.

A Risk and Complexity Rating Framework for Investment Products

Many investors who bought such investments as Lehman Brothers’ minibonds did not understand the products’ complicated features. This fact suggests that if the inherent risk and complexity of products’ structure are not clearly understood by investors, they will be unable to make informed decisions. Some practitioners have recently attempted to calibrate product complexity. The authors propose a framework for classifying investment product risk and complexity separately with a list of factors that contribute to these attributes. They demonstrate the framework’s simplicity and usefulness in helping investors make informed decisions, showing that it can be used to calibrate a variety of investment products. Investors often do not have a clear understanding of the complicated features embedded in complex investment products. In the aftermath of the 2008 global financial crisis, regulators have increasingly looked for various ways to provide such information, motivated by the need to enhance consumer protection. Although risk indicators are well developed and widely adopted, the financial industry as a whole does not have a common methodology to calibrate the complexity of investment products. In this article, we propose a simple, integrated framework to classify both the risk and the complexity of investment products. Risk is decomposed into six main factors: volatility, liquidity, credit rating, duration, leverage, and the degree of diversification. Product complexity is measured by five basic factors: the number of structural layers, the expansiveness of derivatives used, the availability and use of known valuation models, the number of scenarios determining return outcomes, and the transparency/ease of understanding. We simulated and stress tested the proposed framework with a range of weights for the chosen factors and found it to be technically robust. The framework can be used by industry players to enhance product transparency as well as to offer their clients suitable products, appropriately classified by risk and complexity. Editor’s note: This article was reviewed and accepted by Executive Editor Robert Litterman.

Robo-Advisors and Wealth Management

The recent rise of robo-advisors (RAs) has threatened the traditional fund and wealth management industry. RAs’ assets under management (AUM) have risen manyfold through competitiveness on pricing, transparency and services and better expected returns linked to the use of quantitative finance and technology with less subjective human intervention. This article examines the postulation that RAs have an edge over traditional wealth managers. RAs can combine the judgement and computing resources of both human and machine, or bionic power, to provide alternative wealth management services to meet the diverse needs of private wealth clients. However, the authors expect traditional wealth managers to respond by providing new and improved customized and integrated services at competitive fees.

Wealth Management: A Comparison of Switzerland, Singapore, and Hong Kong

By 2015, the wealth of High Net Worth Individuals (HNWIs) in Asia is projected to exceed their counterparts in Europe. The recurrent issue posed is whether Switzerland will be replaced as the premier center for global wealth management? This chapter argues that Singapore and Hong Kong will be significant wealth management centers for both Asian and non-Asian clients. While Singapore ranks highly as an international financial center, it is not likely to overtake but will complement Switzerland in serving HNWIs from around the world.