Singapore fintech Smartkarma enters Hong Kong for equity and China exposure

PUBLISHED : Sunday, 23 October, 2016, 8:06pm
UPDATED : Sunday, 23 October, 2016, 10:52pm

Smartkarma, a Singapore-based financial technology company, has opened a Hong Kong office this month with the ambition to challenge high-cost investment research services of traditional financial institutions.

Chairman and co-founder Jon Foster expects Hong Kong to strengthen its equity research content and insights into China, as more and more clients are interested in investing in the world’s second-largest economy.

Smartkarma is an online platform that offers Asia-focused financial analyses from independent research institutions, ranging from the Chinese economy to the malfunctioning batteries in Samsung’s Galaxy Note 7 phones.

The two-year-old start-up makes money by charging flat fees from subscribers – the institutional investors worldwide such as fund managers – for access to independent research insights and data tools, and it pays research providers based on the value add to the platform.The firm does not have in-house analysts.

Hong Kong strengthens our offering in the equity space, a focus area for many of our insight providers and institutional investors
Raghav Kapoor, chief executive, Smartkarma

Foster said it chose Hong Kong as the first expansion step as exposure in the city will help increase its client base and equity research content.

“Clearly it is one of Asia’s major financial centres,” Foster said. “Lots of users have a strong presence in Hong Kong and we want to support our customer base and external analysts. We also want to further increase our users here.”

Foster and two other Singapore-based co-founders said Singapore offered good talent, bearable office costs, and support from various fintech communities.

Exposure in Hong Kong will help develop China-related insights, as more and more investors are interested in the market.

“In particular, Hong Kong strengthens our offering in the equity space, a focus area for many of our insight providers and institutional investors,” chief executive and co-founder Raghav Kapoor said.

Despite fierce competition in the city and downsizing of some big players like Goldman Sachs, Foster said its Spotify-like research streaming website gives investors a general picture when looking for investment opportunities.

“When investors look to external research, there is often a replication of dozens of research reports covering the same subject, and you feel it difficult to put a whole picture together,” Foster said.

He said that the firm’s streaming technology offers background reading and previous researches in a fluid way, adding depth and structure to research themes, meanwhile the cost for access is much cheaper than traditional sources due to its unique infrastructure.

High cost, conflict of interest between sales and research departments, and a lack of transparency have been lingering problems that have added to the dysfunction in the traditional financial service industry, Foster said.

“Service providers have been operating in the same way for 10 to 20 years with very little motivation to innovate, as they made money so easily,” Foster said.

Smartkarma now has over 100 independent research providers, which translate to more than 400 individuals that contribute research reports.

More than 150 institutions are now using its platform, with activity growing six times year on year.

It raised US$4.7 million in the second-round of financing from investors including Wavermaekr Partners and Jungle Ventures.