Interview with Hyungsoo Lee, Head of Haru Invest
Earn up to 25% APY with Haru — Digital Asset Management Platform for Crypto
8th June 2021 by Seunghwan Lee (SH Lee)
Seunghwan Lee (SH Lee): Please introduce yourself first.
Hyungsoo Lee: I am Hyungsoo Lee, and currently I am in charge of Haru Invest from Block Crafters.
SH Lee: Please tell us about ‘Haru Invest’.
Hyungsoo Lee: simply put, when you make a deposit to a bank, you earn about 1 or 2 % of interest rate. Similarly, if you make a deposit with coins like Bitcoin or Ethereum with Haru Invest, we provide an interest rate between 7% and 15%. And our business is not about deposit-lending. We provide an interest-based risk-free asset management service.
SH lee: How come the earn rates are so high?
Hyungsoo Lee: At Haru Invest, we use risk-free arbitrage trading for our investment strategy. So, even the price of Bitcoin drops, you can have more Bitcoin; you will never make a loss in terms of the number of Bitcoin.
SH Lee: You mentioned a risk-free strategy. How does it work?
Hyungsoo Lee: We implement an arbitrage strategy. There are thousands of cryptocurrency exchanges running 24/7 globally and unlike stock exchanges, the price of coins varies among crypto exchanges. when the so-called Kimchi Premium goes high, people take a profit margin by trading the price differences that exist on different exchanges. So, we devour in fractions of a second to pocket even the minuscule profit. We utilize the inefficiency that exists in the market and last year we made more than 25% on profits (the exact figure varies depending on the timing of the purchase).
SH Lee: If the earn rate is 25% APR, then you get KRW 250 million in return for KRW 100 million?
Hyungsoo Lee: If you deposit with KRW to a bank, you get your interest with KRW, right? At Haru, you deposit with Bitcoin, and hence, you get your interest in Bitcoin. When we say 25% APR, it means when you deposit 100 Bitcoin, you get 125 Bitcoin. If the value of Bitcoin went up to 20% during that time being, it is 125*1.2=150, which means 50% in profit. If let’s say the value of Bitcoin dropped by 20%, then it is 12%*0.8–100, then practically it is break-even.
SH Lee: How did you benchmark Haru Invest? Any services you referenced from the market?
Hyungsoo Lee: Not at all. Actually, I am proud that Haru Invest is the first of its kind in the industry that makes profits based on asset management rather than from the deposit-lending system. Although similar services like Haru were developed since 2020, I am confident that there are no other services that provide the earn rates we offer.
<<From CMA, fixed-term deposit to fund products –Haru is becoming a merchant bank in the crypto realm>>
SH Lee: It is very impressive. So other than earnings, what kinds of services does Haru offer?
Hyungsoo Lee: We have ‘Haru Earn’, which is like a cash management account (CMA). With Haru Earn, you can withdraw anytime you want, and you can earn every day for about 7% APR. you can also just earn for a day since there is no lock-up requirement. Secondly, we have ‘Haru Earn Plus’ and this is a fixed-duration earning product. This is similar to a fixed-term deposit. A major difference with a standard fixed term deposit is that normally the duration for fixed-term deposit products is for a long run like 1 or 2 years. But, with Haru Earn Plus, you can set the duration by day from 15 to 365 days. Although withdrawal is not possible during the lock-up period, our users can receive higher returns — so the longer the duration, the higher the earnings it is.
SH Lee: What is ‘Haru Investment’? it is not too different from the name of the company, Haru Invest.
Hyungsoo Lee: It is a fund product with a target earn rate of 20~23% a year. With Haru Investment, a performance fee of 15% of the total profit is charged only when the return exceeds 15% APR. So, if the return is less than 15% APR, then we return everything to the users without any deduction of a fee.
SH Lee: How did you expand your business portfolio products one by one?
Hyungsoo Lee: We started with a fixed-term duration product. But since it was very new, our users didn’t really have a high level of trust in our service. So, we allowed easy withdrawal just like how CMA works. And then, our users were looking for a high return even if some risks followed. And we developed “Haru Investment”. We check earn rates every two weeks, when at its lowest, it was about 13%; when it was at its highest, it was about 30%. What we did was we tried to meet our users’ needs.
SH Lee: And meanwhile, Bitcoin price surged. The earnings could have been more than 30% if we held on to Bitcoin.
Hyungsoo Lee: But if we put it differently, we can increase the number of Bitcoin in the bear market because we only do arbitrage trading that makes no loss but profit from the beginning. So generally speaking, it does not affect us a lot whether the market is in a good shape or not. Although there are some exceptions like if there is less enthusiasm and interest in the market, the trading volume decreases, and hence less room for opportunity followed by reduced inefficiency in the market.
SH Lee: Which product do you recommend the most?
Hyungsoo Lee: That would depend on the investor’s preference. For example, with Haru Earn, withdrawal is available 24/7 whilst Haru Invest offers you a higher earning. And Earn Plus is somewhere in between. It really depends on what perspective you have on crypto. If you prefer a high return with a risk, we recommend Haru Invest. If you want to be free from the everyday ups and downs of trading coins but have trust in crypto, then we recommend Haru Earn Plus.
<<Maintaining stable return rate thanks to Haru’s partnership with world top-tier institutions>>
SH Lee: Haru’s products can have a negative return if cryptocurrency price plunges, right?
Hyungsoo Lee: We certainly offer services that ultimately increase the number of cryptocurrencies you own, but certain things that are out of our control such as the decline of the value of crypto. If the very fundamental trust behind Bitcoin tumbles down, then no players would be left in the market, and then there is not much we can do about it. On the other hand, if the price of Bitcoin goes up, then we can make profits in all three areas: Earnings, investment, and the value of Bitcoin.
SH Lee: At Haru, do you believe in the bright future of crypto?
Hyungsoo Lee: Rather than giving a short-term projection like specific crypto in the market will unfold, in general, we do believe that a digital asset market will grow. and At Haru, we offer services to invest more wisely in the ownership and investment of such digital assets. The question to start with is simple — why not deposit your cryptocurrency with Haru instead of keeping it in a wallet just like how people deposit their cash in a bank; and why not ask for a professional for cryptocurrency investment when people invest in stocks and funds by using professional investment service.
SH Lee: Even if you have outstanding techniques, don’t you feel anxious when handling other people’s assets?
Hyungsoo Lee: We try to give as much as returns to our customers. Ensuring an increase in our net profit is not our top priority. Some conventional funds tend to earn their profits by increasing the fee rather than making more returns per se. At Haru, we do not charge any fee. And if your earning is less than 15%, you get 100% of your return. When the return rate is more than 15%, we give 85% of the return made to our customers. Our team actually invests with Haru’s products and sees how it unfolds and carries the risk ourselves, too.
SH Lee: You have a huge trust in your service algorithm.
Hyungsoo Lee: Yes, not only do we have a very talented in-house system trading team, but also, we have expanded our partner network as our volume of asset management scaled up — now we have global partners who have expertise in algorithm trading. This allows us to be safer to some extent since we don’t just use one scope of strategy. With global top-tier trading partners, we have record profits on 12th March 2020 when there was about a 35% drop in the market.
SH Lee: As far as I understand it is much difficult to make profits when the volume of arbitrage trading gets bigger. What is your daily trading volume and how far can your profit go?
Hyungsoo Lee: Just by looking at our simulation such as back-test, I cannot give you a full answer but roughly speaking about KRW 100 billion can be operated within our in-house system trading team. And the reason we work with our global partners is that we get a lot of know-how throughout our interaction with them and thereby we advance each other’s algorithm. Furthermore, we can distribute our strategic portfolio when we work with our partners which allows usw to spread the risk too.
<<Started small but strive for completion>>
SH Lee: How did Haru all come about?
Hyungsoo Lee: Haru is a subsidiary firm of Block Crafters which started as a blockchain start-up accelerator in 2018. Haru Invest kicked off in Vietnam in August 2019 and garnered global attention from the beginning of our service. And we embarked on a proper promotion from San Francisco within 3 months since the launch and now we have users from more than 100 countries around the world.
SH Lee: What an achievement from the start. You started from Vietnam and expanded to more than 100 countries in just two years.
Hyungsoo Lee: Yes, this early success was unexpected, and we then expanded ‘Haru Invest’ business to a greater extent. Of course, we continuously work with blockchain start-ups by providing acceleration programs and we also run D.Street which is a blockchain media platform in Korea.
SH Lee: Are there any similar services to Haru from overseas?
Hyungsoo Lee: Actually, there are a few in Korea as well. Of course, there are services offered based on arbitrage trading, but some deploy different strategies like trend following. What differentiates Haru from others is that we actually have an in-house team that is responsible for making our own asset management algorithm. On top of that, we have experts who have extensive experience with the cryptocurrency market crash. When Bitcoin dropped by 35% for two consecutive days in March 2020, so many users pulled out from the market but made it through the downturn market — this proved the level of strength and stability of our strategies.
SH Lee: It is always good to have an internal trading team — but wouldn’t it be better to not experience a market crash and just learn the experience through back-test?
Hyungsoo Lee: The thing is that the reality is very different from simulation. The most profound difference is the leverage part. When the market is declining out of the projected boundary, then a projection based on simulation such as “buy at a certain point and sell at a later point would give a certain ratio of profit” becomes meaningless. And taking too much leverage can be considered for mandatory clearing for sure. So, I would advise you to check the actual operation period of any product or service of your choice.
SH Lee: Could you please further explain what you mean by leverage?
Hyungsoo Lee: So, when we say net interest margin, it is a measure of the difference between interest paid and interest received — so someone is lending the money whilst the other is borrowing it — and in this case, the bank is earning in interest on loans compared to the amount it is paying in interest on deposits. But in the crypto realm, no one wants to borrow coins; they all want to put their crypto assets as collateral for a loan because they all have bought them expecting the price will go up.
So, professional investors borrow stable coins backed by collateral crypto for lent out and buy Bitcoin or Ethereum again. By repeating this process, they maximize their profits. This is called yield farming, and this is known for high-risk investment. But we, at Haru, only deploy strategies like arbitrage trading which utilizes the inefficiency of the market so that we can minimize the leverage to lower the risk as much as possible.
<<Quit top tier company to join Block Crafters to change the world with Blockchain>>
SH Lee: How did you join Block Crafters?
Hyungsoo Lee: I majored in electrical and electronics Engineering at Korea Advanced Institute of Since and Technology (KAIST) and joined Doosan Heavy Industries and Construction. Back then, Doosan was more than just baseball; Doosan was doing pretty well in the generation sector. Anyway, I realized my skills with engineering major was not good enough for the large scale plant industry, so I went to the Graduate School of Business at Sungkuynkwan University for MBA where I studied financial accounting and afterward worked in investment management firms, mostly responsible for financing projects at home and abroad.
SH Lee: Interesting. Could you elaborate on your previous work experience?
Hyungsoo Lee: Sure. For example, let us assume a global shipping company wants to purchase a large vessel. To finance it, probably 50% of the capital comes from bank loans and 30 to 40% comes from other than banks, and of which involves equity financing, partly combined with mezzanine financing. So I was mainly in charge of landing a major deal abroad and raise funds from major asset management firms. I would literally visit and give presentations to financial institutions and asset management divisions from insurance companies in Korea to rain funds.
SH Lee: You have done a lot for yourself since a young age!
Hyungsoo Lee: Well, not so much because what I really did was to just follow the big picture already laid out by major financial companies and funds from the US and make sure that such strategy could be implemented well to raise funds in Korea. I wasn’t exactly developing such a strategy myself. And of course, I learned a lot throughout my experience but I wanted to take more part in strategy development and so I moved to the Future Strategy Team at GS Caltex. Most oil refiner companies like GS Caltex have a lot in cash but they are sensitive about crude oil prices and hence always conscious about a possible fall in the oil price.
SH Lee: What was it like at GS Caltex?
Hyungsoo Lee: I enjoyed myself a lot at GS Caltex. Many senior managers were traditional elites because, in the 1980s, oil refiners were in the same league with major companies like Samsung and Hyundai. Working in a conservative company with mainstream elites at the top, you had to be very logical with a precise argument to persuade the meticulous senior management. For a new business, I once suggested integrating blockchain technology with the refinery industry, but the proposal did not go through. And this is when I actually developed my interest in blockchain and cryptocurrency.
SH Lee: Between Blockchain and Cryptocurrency, which one caught your mind more?
Hyungsoo Lee: Actually, I don’t like to think of them in a separate box because I think cryptocurrency is what oils the wheels of blockchain as a whole. In this regard, I also believe a part of the human desire to change the world needs to be embedded here as well. Cryptocurrency and mining caused a great upheaval, but that very human desire is the actual driving force behind the blockchain ecosystem. Private blockchain may be useful for some specific services, but what can really change the world is a public blockchain with a proper incentive system in place with coins.
<<Both individual growth and company’s growth are equally valued at Haru >>
SH Lee: I See. Now, going back to the previous question — how did you join Block Crafters?
Hyungsoo Lee: I actually received some offers from other major companies’ strategy divisions. But I wanted to work in a free and flexible environment and so I decided to go to a start-up company. I looked up for few start-ups through the KAIST alumni network and I came to know few blockchain companies like Ground X, Foundation X, Hashed, and Chain Partners.
SH Lee: What made you choose Block Crafters over Ground X and Hashed which are all top-tier companies in the blockchain industry?
Hyungsoo Lee: I wanted to work in a company where I could picture myself growing, and I believe I made the right choice. Our co-founders have a great mindset, and the company offered a lot of opportunities to grow as a professional. The company was not all about making a move unconditionally; it was about pioneering a new area and recognizing the risks well. Block Crafters is also about sharing the profits with the employees as they expanded. Block Crafters already once offered employee stock options at the beginning of last year.
SH Lee: How did Haru all start?
Hyungsoo Lee: When I joined the company in 2018, I was concentrating on accelerating programs. At the end of the year, we all did a presentation about which area shall each of us focus on, and there I brought the idea of a crypto bank to the table. My insight was that cryptocurrency will not just remain as a utility token. It will become more of an asset and there will be a growing demand to invest in cryptocurrency just like how it is done in a traditional financial market. And so, we developed a prototype of Haru — when you deposit cryptocurrency, you can earn profits.
SH Lee: Interesting how you came to think about combining the role of bank and asset management firms where the former gives the interest and the latter earns a profit.
Hyungsoo Lee: In reality, there is a clear boundary among banks, securities firms, and investment firms for various reasons. But I believe there will be some kind of innovation in the long run and the crypto realm happens to experience such innovation earlier than others. It is still inconvenient when you think about taking your money out from a bank and deposit in your securities account and invest in a fund. At Haru, you can withdraw your crypto any time you want and start crypto investment by setting your lock-up period from 15 days up to one year.
<<Global project offering unique and unparalleled experience>>
SH Lee: How many people are working at Haru?
Hyungsoo Lee: There are a total of 50 people working at Block Crafters and about half of them are working on the Haru platform.
SH Lee: Your company is recruiting from all areas. Do applicants need to be blockchain experts?
Hyungsoo Lee: Not necessarily. Whether it is a developer, designer, algorithm trader, or marketing expert, blockchain knowledge is no pre-requisite. We are looking for talents who can focus on a product and have relevant experience in understanding the users.
SH Lee: Your company is leading a global project. How different is it compared to a local project?
Hyungsoo Lee: We have users from more than 100 countries so sometimes we have a sudden inflow of users coming from a single country and this tends to be a repetitive pattern we see. We don’t really know how this all happened when no proper promotion took place in that country. So, in this case, the job would be interesting if you like to read the trend from the given data, check telegram 24/7 and reach for an answer after thorough exploration.
SH Lee: What is your plan to expand Haru’s business?
Hyungsoo Lee: We hope to expand our business by offering more different services hopefully on a bigger scale. If there is room for improvement in the crypto finance where the users find inconvenience is where we can dive in to expand further.
<<Guaranteeing stability in a rapidly growing market>>
SH Lee: Is there any distinctive corporate culture you have at Haru?
Hyungsoo Lee: I really gave my thought to making a 25-page culture book with our CTO. We tried to put as many stories as possible by including our mission, future vision, and the way how we work. At Haru, we have fully implemented a flexible working system and many people find this astonishing but simply put, as long as you are fully efficient with your work, you are not bound by location nor working hours.
SH Lee: But what is efficient for one person may not contribute to the efficiency of a team.
Hyungsoo Lee: That is why another very important value at Haru is communication. If you are working 40 hours a week, then 10% of your working hours, 4 hours, should be used for prepping your communication with others. Some companies do not regard this kind of communication as work, but we do. The very essential part of your work is to share what you are doing with the rest of the team and we try to be prompt and stick to scheduled appointments.
SH Lee: So, freedom comes with responsibility.
Hyungsoo Lee: Yes, it goes the same for taking a challenge. We encourage our people to take a challenge, but the outcome must be shared. The very core value of the Haru team as emphasized in the culture book is Exploration. What differs Exploration from Adventure is that after you have taken a hard and difficult adventure, there is an end to it; however, Exploration is about accumulating that adventure as experience. This is why when you search the word adventure, you get Indiana Jones but when you search Exploration, you will find space the most as your search result.
SH Lee: Your culture of communication and sharing — how has that settled in your company?
Hyungsoo Lee: All the schedules and appointments are recorded and shared on Google Calendar for everyone to see. Meeting minutes, townhall meetings, and the process of a product are all archived in the notion. So, anyone in the company can find out what is happening in our company. Every team can decide how often they would like to have a meeting — so some teams have on a daily basis, and some have on a weekly basis and thereby we try to respect each other’s ways of work and their areas of work.
SH Lee: Thank you very much for the interview. Last but not least, would you like to wrap up with any final message?
Hyungsoo Lee: Yes, as we started our service on Haru, we wanted to offer the most conservative form of service in the most rapidly growing market. And we have proven and are still proving in the market that Haru can offer a stable return in terms of the number of coins even when the price of Bitcoin and Ethereum hike or plunge.
Furthermore, we are seeking to offer a new financial service that excites everyone and goes beyond the current crypto deposit-based platform. If you would like to join our journey, please contact us. We will strive our best to make sure that everyone in the world can be fond of a new financial service made by Koreans.
Translated from: https://ppss.kr/archives/242404