Bond house Standish targets Asia growth
Standish, the core fixed-income asset-management shop under the BNY Mellon Asset Management umbrella, is adding resources to boost its institutional business and client servicing in Asia to handle demand for bond exposure.
Des Mac Intyre, president and chief executive in Boston, says the firm has added a product specialist in Australia this past year and is considering adding another based in either Hong Kong or Singapore. The hires report to David Jiang, BNY Mellon Asset Management's Asia-Pacific chief executive, and are in line with growth plans reported by AsianInvestor in December.
There is increasing demand for the credit shop's portfolio managers to travel to meet with clients and prospects, and the idea is to relieve their burden while boosting client service in the Asia time zone.
Japan is the biggest market for Standish outside the US, but this is mainly for retail-orientated products sold via Japan's big brokerages. The manager is primarily an institutional firm and is looking to grow its presence among pension funds, insurers, sovereign wealth funds and other institutions in Asia and Japan. In December, for instance, Standish was one of three managers to receive a $200 million mandate from Taiwan's Bureau of Labour Insurance, as reported by AsianInvestor earlier this week.
Mac Intyre says the firm attracted considerable net inflows in 2009. As of October, its AUM had surged from $45 billion to $62 billion, with certain products witnessing growth rates of more than 60%. Europe and Japan were important contributors to this growth, he adds.
The firm also runs a global bond work-out practice; to date, the solutions group has advised on a cumulative $26 billion of assets.
For the time being, Standish expects the trends of 2009 to continue this year. This included moves by global investors into high yield, both in the US and worldwide. Given the still-high spreads in high yield and easing concerns about defaults, this remains an attractive asset class for anyone seeking higher returns, Mac Intyre says.
The move by American and international pension funds and other investors to US investment-grade credits that dominated 2009 is likely to expand more into non-US credit opportunities, he adds.
Mac Intyre expects the demand among Asian investors for local-currency emerging-market debt to continue.
Among US-based investors, he says flows suggest growing demand in 2010 for non-US credit with an absolute-return focus. "It's not going to be about tracking error or the Barclays Aggregate Index," he suggests.
Inflation-linked bonds are also expected to attract flows, as others have also noted. For now, this remains a largely retail phenomenon in the US, but Mac Intyre says there is growing interest among central banks and sovereign wealth funds, particularly for global exposure. However, he does not see much demand for such instruments from Asian clients. "The focus in Asia is still on yield," he says.
A major reason why Mac Intyre expects all these strategies to do well is not just because of short-term benefits versus other asset classes. Rather, he sees a growing shift among pension funds worldwide to pursue liability-driven investment strategies.
"These flows are less about market timing, and more about asset/liability matching and removing volatility from the balance sheet," he says. In the US, this means rising demand for credit exposures and the use of synthetic exposures to create absolute returns that beat liability-determined targets.
This is another reason why Standish is adding product specialists to its ranks. These roles are intended not just to sell particular products, but to help clients with ideas around assets and liabilities and balance-sheet modelling. "It's not consulting," says Mac Intyre, "but a way to provide clients with ideas."