How your money and assets are kept safe and secured when investing through Endowus Hong Kong

The safety and security of client assets at Endowus have been a top priority of our foundation.

Many failures of banks and financial institutions (especially fintechs) happen because they are in the business of taking client deposits (a balance sheet liability) and lending out or investing that money to hopefully make an interest or return margin.

Just as we would want our own wealth safeguarded, we structured our business processes from the beginning to make it the safest way to invest digitally in Hong Kong. We offer no leverage and no lending out of client monies or assets. Invested client assets are ultimately held by fund-appointed custodians, and our client assets are matched dollar to dollar. These are structural safeguards we purposefully designed to protect client assets, which are held completely segregated from Endowus house assets and nobody else has any claim over them other than the client.

Endowus Hong Kong is regulated by the Securities & Futures Commission of Hong Kong (SFC), and we are required by law to segregate client monies and client assets from our own and maintain a ledger of all holdings. We report to SFC all of our segregated client accounts on a regular basis, and are also audited by PricewaterhouseCoopers where part of their role is to verify and audit the segregated clients' accounts. 

Your cash holdings (uninvested cash)

In Hong Kong, our client cash custodian is HSBC. This means that clients send money to an HSBC segregated client money account earmarked for Endowus clients only, and funds are strictly not commingled with Endowus balance sheet money or house operating accounts. 

Each client is assigned specific virtual account numbers which allows Endowus to identify who is depositing funds into our client account and credit the necessary client account balances accordingly. Each client’s individual ledger is maintained by Endowus and the sum of all client ledger balances will always equal the total amount of money in our HSBC client account. 

If something were to happen to Endowus, cash held in the segregated client accounts would be kept by our custodian HSBC for the appointed liquidator to direct the return of money to individual clients in an orderly manner; or the money and account ledgers would be passed to another SFC licensed entity with client details to take over of the service. Endowus would not be able to use these segregated client monies for its own operations, and our creditors would not have any claim over the client's money account. 

Your assets (investment holdings) 

When you invest in a fund through Endowus, Endowus aggregates client orders and directs HSBC to send the subscription monies to the fund-appointed custodian alongside the corresponding order details to the fund-appointed transfer agent. Sometimes this is done through another third party execution platform approved by the fund house, as fund houses may not have the capacity to deal with large numbers of distributors and order flows and prefer to work with an aggregator execution platform. In Hong Kong, one of such approved execution platform is Allfunds, which is one of the largest B2B fund execution and settlement platforms and is also SFC licensed. The flow would then go from HSBC > Allfunds > fund-appointed custodian. 

While the fund manager is responsible for trading decisions, the fund-appointed custodian’s role is to safekeep the fund’s assets, which typically include securities such as stocks, bonds and other financial instruments. Hence, the fund assets are also segregated from the fund manager’s house account. The fund custodian is also responsible for maintaining ownership ledgers, valuation, accounting and reporting of assets in the fund. Major custodians commonly used by fund managers include State Street and BNY Mellon. 

Allfunds in this context is a ledger keeper linked up with many fund-appointed transfer agents and custodians to make communication and fund transfer protocols consistent. They are not custodian of the assets, and can also be replaced with other such services or we can bypass them if we find more efficient rails. 

Client investments are omnibused and held in the name of Endowus on behalf of clients, held under records by the fund’s transfer agent, which is responsible for maintaining ownership records. Each client’s record of individual fund unit holdings is maintained by Endowus. Ultimately the counterparty risk here is the custodian breaching their role, and not having the assets they say they have on behalf of the beneficiaries of the managed fund.

If something were to happen to Endowus, because client assets are matched unit for unit and not lent out by Endowus or the fund custodian, any investment holdings could be transferred to a client account at another financial institution, or the asset ledger would be passed to another SFC licensed entity with client details to either assist in the wind down or take over the service. Endowus would not be able to use these segregated client assets for its own operations, and our creditors would not have any claim over the client assets. 

The safety and security of clients’ monies and assets are of utmost importance to us

We built Endowus to bring institutional-grade investing to all of us. Safeguards, security, and continuity are built into every layer of our platform.

If you still have any questions, feel free to reach out to our SFC licensed client advisors or email support.hk@endowus.com.

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Risk Warnings

Investment involves risk. Past performance is not an indicator nor a guarantee of future performance. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Rates of exchange may cause the value of investments to go up or down. 

This article is not intended to be relied upon as a forecast or research or investment advice, and should not form the basis of any investment or other decisions. The information contained herein is not intended, and should not be construed, as any legal, tax, regulatory, accounting or financial advice. If you would like investment, accounting, tax or legal advice, you should consult with your own professional advisors regarding your individual circumstances and needs.

The information in this article may not be suitable for all investors. You are responsible for any action that you take or decision that you make in reliance on any content in this article, and you agree that Endowus HK Limited (“Endowus”) is not liable under any circumstances.

No invitation or solicitation

Neither the information, nor any opinion, contained in this article constitutes a recommendation, offer or solicitation  by Endowus or its affiliates to you to buy or sell any securities, collective investment schemes or other financial instruments or services, nor shall any such security, collective investment scheme, or other financial instruments or services be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction. 

This is not intended to be an invitation or offer made to the public to subscribe for any financial product or to enter into any transaction.

Accuracy of Information

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Opinions

Any opinion or estimate above is made on a general basis and none of Endowus, nor any of its affiliates, representatives or agents have given any consideration to nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Opinions expressed herein are subject to change without notice.  

Any forward-looking statements, prediction, projection or forecast on the economy, stock market, bond market or economic trends of the markets contained in this article are subject to market influences and contingent upon matters outside the control of Endowus and therefore may not be realised in the future. 

In presenting the information above, none of Endowus, its affiliates, directors, employees, representatives or agents have given any consideration to, nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Therefore, no representation is made as to the completeness and adequacy of the information to make an informed decision. You should carefully consider whether any investment views and products/ services are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances.

This article has not been reviewed by the Securities and Futures Commission of Hong Kong.