19 May 2016
Hi-tech Investment Solutions
Viewed as a once-in-a-generation opportunity, the fast-evolving Fintech industry has the potential to disrupt legacy practices, while improving customer experience. At the forefront of Hong Kong’s Fintech revolution is Lattice Ltd, founded in 2013 as an IP-driven capital-markets start-up. Led by Wing Cheung, former European Head of Portfolio Analytics at Lehman Brothers and Nomura International, the company’s marquee product is the Lattice Elegant Portfolio Discovery (EPD) Decision-Support Platform.
EPD is marketed as a tool to optimise portfolios by removing “noise” – or meaningless data – from portfolios, significantly enhancing investment performance. The platform targets global professional fund and risk managers at private wealth, pension funds, mutual funds, insurance companies, sovereign wealth funds and hedge funds. The company’s innovations have led to several awards in the past year, including the 2015 UK Trade and Investment (UKTI) Fintech Grand Award and the Best Fintech Gold Award at the Hong Kong ICT Awards in April.
“Over a decade-long period of rigorous research and interactions with professional investors in Europe, the United States and Asia, we discovered that many of the asset management industry’s billion-dollar puzzles, such as skill versus luck, signal versus noise, investment factors versus risk factors, are due to the universal invisible and fuzzy nature of portfolio decision-making,” says Mr Cheung. “In other words, we felt as a firm we could address a fundamental yet universal pain in the investment world.”
Proprietary technology at the heart of Lattice’s system can make portfolio management more transparent and precise, according to Mr Cheung. In creating a tool to help in decision-making for the front offices of financial services companies, Mr Cheung says he took inspiration from the impact nanotechnology has had on the healthcare and manufacturing industries.
To move from idea to execution, Lattice raised seed funds, and built an elite team comprising a financial economist, a veteran financial technologist, and a financial services consultant with a proven reputation for creating unique solutions. The team also leveraged its combined 32 years of client consulting, product research and development, and team management experience to develop the EPD platform.
According to Mr Cheung, the company has benefited from the boom in Hong Kong’s start-up environment. “The progress Hong Kong has made in building its general tech start-up ecosystem over the last three years has been impressive,” says Mr Cheung. “Encouragingly, government policies are also adapting very quickly to support Fintech.”
Specifically, he cites dedicated programmes offered by Cyberport, the Hong Kong Science Park and InvestHK as supporting this fast-developing industry. With Hong Kong’s status as among the world’s leading financial centres, bank-backed accelerators are also ensuring that homegrown Fintech firms flourish.
But the emerging industry faces hurdles, in particular in transitioning from niche to mainstream. For the Fintech industry to continue growing, Mr Cheung says the emergence of a new generation of top-notch technology talent is necessary, as is access to incubator capital, potentially in the form of a high-end Fintech investment fund.
Despite the obstacles, the progress made by – and the recognition bestowed on – Lattice shows that opportunities exist for Fintech firms to establish in Hong Kong to build market share here and abroad.
Mr Cheung says the Lattice EPD platform has attracted significant attention outside Hong Kong. As examples of both the platform’s scalability and the growing profile of Hong Kong Fintech firms, he cites recently signed Proof-of-Concept projects with sizeable financial institutions in London, including Hermes Investment Management; and Israel; as well as letters of support with numerous institutional investors and technology partners.
The early successes of Fintech pioneers such as Lattice plays to Hong Kong’s natural strengths in the financial services sector and innovation-based culture. But as with all start-up sectors, ambition and drive alone cannot sustain a nascent industry. The right people and support are required to spin opportunity into reality.