SILEX - When Technology helps you Build Better Portfolios
Roughly five years after inception, Swiss tech-driven investment firm SILEX has built a business spanning Europe and Latin America and has recently been making a push into Asia. SILEX offers intuitive solutions that help its now roughly 400 independent wealth management and family office ‘partners’ to create optimised portfolios with enhanced risk mitigation, greater compliance in terms of suitability for the end-clients, and better, more tailored and targeted outcomes. SILEX provides its solutions to these partners across four asset classes, namely equities, multi-asset, fixed income, and convertible bonds, and believes that its hybrid asset management model of technology aligned with human expertise is an ideal solution for Asian EAMs and family offices who need access to sensibly priced bespoke portfolio building capabilities that express greater conviction. Hubbis ‘met’ recently with Geneva-based Xavier Laborde, CEO of SILEX, to learn more of the firm’s mission, offering and plans, and found a leader who has a clear vision of the path ahead, and how to overcome some of the key challenges, something he and his co-founder have achieved particularly well with a business that now houses three core and fully inter-linked operations and a headcount of almost 100, with some 20% of the team now holding 30% of the equity and very evidently committed to building medium to longer-term value creation. And he told us how this long-term vision extends to sustainability, with the firm dedicated to building education and also financial participation in key ocean preservation initiatives amongst its teams, its partners, and the world of private clients.
“Quite simply,” Xavier begins, “our hybrid approach combines human convictions with proprietary technology to help wealth managers optimise portfolio construction and to grow their clients’ wealth and their own businesses. We provide open-ended and tailor-made investment solutions, leveraging synergies across three business lines: investment solutions, research & technology and asset management.”
He explains that central to everything they do is their proprietary SPARK suite of quantitative digital tools. “What we provide is a modern range of asset management strategies built for a low-rate environment, with private wealth partners in mind,” he reports. “We are free of benchmark constraints in our approach, we focus on drawdowns, and we curate optimised risk-managed strategies across the four asset classes.”
Rapid growth since 2016
He explains that SILEX was born in 2016 to focus on Switzerland and France, and the firm then began promoting itself to wealth managers and family offices in Latin America and then in Asia around the time the pandemic hit the world.
“My co-founder and I combine 40 plus years of experience in the investment banking and asset management businesses, and we created what we had conceived as a hybrid model designed for independent wealth managers and family offices,” he elucidates. “The idea was to cater to the new constraints and new needs coming from these IFAs, all over the globe and especially in the beginning starting with Europe. They have seen regulation and market forces driving the need for tighter and more tailored portfolio allocation, in terms of risk control, in terms of process, and to bring more added value to their clients.”
Technology and individual expertise combined
SILEX is therefore predicated on bringing added value to the investment process by aligning human conviction, fundamental analysis, and technology, Xavier elaborates. “And when I'm talking about technology, I'm talking about quantitative and risk control and asset allocation tools, but also in terms of digital platform, providing much more transparency, better reporting, and enhanced content through digital tools and a digital platform,” he says. And SILEX appears to have succeeded thus far, as it has grown very rapidly to around 100-strong today, having started as just the two co-founders five years ago.
He also reports that SILEX now comprises three different departments. One is represented by SILEX Technologies, which provides all the data, the tools, and the digital platform under the brand SPARK. The second is an asset management company, regulated in Europe, in France, in Switzerland and in Luxembourg. The third is the investment solutions company, which is dedicated to providing tailor-made and customised investment solutions such as structured products, AMCs [actively managed certificates], indices, and SPVs.
“All three are completely linked and aligned in order to optimise the portfolio management or asset allocation for our clients,” he elaborates.
“We operate open architecture, so this is not about pushing our own products, it is about finding the right products to fit clients’ needs, and that fit our conviction and our technology. The final decisions come after detailed discussions between our experts and, for instance, the CIO of a family office. Importantly, everything is curated to ensure compliance and the highest standards in terms of risk control, in terms of allocations, and to make sure that the outcomes are in line with the risk appetites of our clients and of course their end-clients.”
As such, SILEX has been building its team of fund managers in different asset classes to provide white labelled solution to its partners, as well as offering customised wrappers such as dedicated funds or AMCs (Actively Managed Certificates).
“And we started also creating our own flagships while working obviously on the performance and the consistency of performance of our own strategies,” he reports. “The result is that today we combine the attributes of a brokerage, an asset management company, and a FinTech. And SILEX is today operating with its roughly 400 wealth manager partnerships across Europe, South America, and more recently Asia.”
First step – understanding the clients
Xavier offers a practical perspective on the typical client, an EAM with a number of end-clients, who are most probably HNWIs, possibly even UHNWIs. “We work with these partner firms, not with the end clients,” he reports. “The first thing we do is understand how this EAM builds the portfolios for their clients, and what they are targeting in terms of assets and geographies. Our SPARK technology analyses the portfolios they provide their end clients through a tool called Analyzor, allowing for an understanding of the correlations between the different assets, and uncovering hidden risks – perhaps excessive concentration in a sector of geography – that they might not have been aware of.”
Next step – optimise portfolios
The results spur another discussion, perhaps with the CIO of a larger EAM or family office, or the partners of that firm. “We then refine the objectives, zoom in on the risk appetites and use SPARK to help us in the next phase, namely our portfolio optimisation process, employing algorithm-based quantitative models to give the final asset allocation output to achieve the optimal risk reward scenarios.”
For example, he says there might be a discretionary mandate in US Dollars targeting a return of between 8% and 12% a year, with volatility capped at 10% to 12%. “We then build the optimal asset allocation, and the beauty of this is it is totally scalable, because all of these partners need to deliver across a variety of portfolios and different asset classes.”
For sale – independence of thought and action
He explains that the firm decided early on against selling or licensing its software, instead driving revenues by building and selling structured products, AMCs, SPVs, and funds, which could be white labelled, dedicated, and tailormade.
“These wealth managers are every day buying structured products through brokerage firms or investment banks, or buying funds, but there had been no independent business model such as SILEX to combine the asset management expertise, along with the investment banking and investment solution expertise. So, we offer these structured products as well as our totally independent advisory, asset allocation analysis and expertise, continually combining technology and conviction.”
He adds that through their different teams covering credit, equities, multi-assets, and convertible bonds, they are also providing ideas and convictions to their partner clients. “In short, the custodian will buy a product through an investment bank, but the product has been set up by SILEX, and we will take a markup between the investment bank and the custodian bank which is buying the product. So, in some ways, it looks like a brokerage business.
Hitting the billion-dollar mark
Then on the asset management side, the client will buy one of the SILEX-devised funds directly from SILEX Investment Managers, which is a traditional asset manager creating and delivering tailor-made AMCs, or actively managed certificates for the market. “And the result is that the firm today has approximately USD1 billion assets under management, with a rapidly growing business in Asia, where demand for our AMCs is rising fast,” Xavier reports, with considerable enthusiasm.
And he offers three key reasons as to why SILEX clients work with the firm. “They need greater conviction and expertise in terms of investment ideas, so they want investment solutions from a totally independent company. They want to ensure that the performance is checked and controlled, and is in line with the client's mandates, and that they can do through our technology. And thirdly, we save them money, as through our digital platform they can bypass a huge amount of time and effort curating their own solutions by talking non-stop to third-party brokerages and firms.”
Xavier reports that his number one mission currently is to invest further in the firm’s technology and expertise. “It is a cost centre, but it's really important as it makes a significant differentiation compared to our competitors,” he reports. “The second priority would be raising the level of expertise inside the asset management company by hiring some more top fund managers. And the third key mission will be increasing the number of partners in Asia and in South America, which in terms of geographical expansion are our two key target markets outside Europe.”
Asia – great potential for SILEX
Xavier explains that in his previous role at Exane (BNP Paribas), he had experience in Asia, building teams in Singapore and Hong Kong, and when SILEX was established, it was logical and appealing to venture out into the region. “We are a newcomer, but the potential is huge,” he reports. “The need for digital tools and greater expertise in Asia, and especially in Singapore, is clear and obvious. There are many players who will benefit from our disruption, as the EAM market in Asia is growing fast, but it needs better technology, greater conviction and elevated expertise.”
He draws the conversation towards a close by noting that a key factor in exploiting the growth potential he sees ahead is attracting the right talent. “When we created the company, we made sure we had a strong built-in appeal in terms of capital structure, and today some 20% of our team are partners who now represent 30% of our capital; that has really helped attracting the talent that we could not have paid for with high fixed salaries and bonuses. But our model appeals to these types of people who are mostly between 35 and 50 and who used to work in investment banks, or big asset managers, and who want a more entrepreneurial platform through which they can build their own business with us. And that is helping us create value for the firm and for our key team members, and for our clients.”
Trust as the enduring value
Xavier’s final word is that the result of this structure and the way the firm has developed is that SILEX has been able to build and retain trust with its clients. “Our key people are essentially backing us and their future with us by essentially locking up their money with us as partners in the business,” he says. “This means that they intend to be there with us in many years to come so they will then see the major financial returns, and of course to achieve that they will bring more clients to us and retain more clients and we will build with all of them.”
Getting Personal with Xavier Laborde
Xavier comes from Paris, attended boarding school there and then studied mathematics and engineering at university before completing his business studies at the prestigious EDHEC, also in Paris. At the age of 24 he left Paris, moving first to New York, then London and then Switzerland, where he has settled.
Before founding SILEX, he worked for 12 years at Exane BNP, one of France’s leading banks for derivatives and structured products, his last role being head of investment banking there. “We had offices in most of the major centres, so I spent a lot of time outside France in those years,” he recalls. “We also had an office in Singapore, so I spent a lot of time travelling.”
He is married and they have two boys aged nine and seven, both born and raised in Geneva, where Xavier has now resided for some 15 years.
Spare time is spent sailing and skiing, both competitively. He is also involved in the organisation of big yacht racing events around the globe and ski events in the Alps, with Val d’Isere his favourite venue in France and Zermatt in Switzerland, often competing himself is slalom and giant slalom events. “It is a bit dangerous,” he concedes, “and I usually have a major accident once every few years, but it is still worth it for the sheer exhilaration.”
His favourite sailing event is the Rolex Cup that takes places in the waters between Sardinia, the south of France, and Mallorca in Spain. “There are associated sustainability initiatives we are involved in around protecting the oceans, as well,” he reports. “We even link ocean preservation to our portfolio curation as a company and give some of our revenues to different bodies to help educate people on pollution of the oceans, the dangers of plastics, and sustainability. We like to mix our future growth with sustainable growth and align ourselves, our clients, and partners inside this investment philosophy. That is a major thrust we have been involved in since early 2020
More from Xavier Laborde, SILEX