Nikko AM plans Asian, EM fixed-income fund launches
Nikko AM is training its sights on launching Asian and emerging-market fixed-income products out of Singapore after completing its acquisition of DBS Asset Management.
The firm, now Asia’s largest regional asset manager with over $165 billion in AUM, has been bolstered by an eight-strong corporate credit team from DBS AM, to complement its existing Asia ex-Japan equities team led by manager and CIO Soo Nam Ng.
While the deal was unveiled last December, the teams will be joined in body as well as spirit on October 17 in Singapore, when DBS AM becomes Nikko Asset Management Asia.
Tim McCarthy, chairman and CEO of Nikko AM, says the firm will be looking to create a broader fixed-income suite, on the understanding that aging populations in Asia – he lists Singapore, Hong Kong, Taiwan and Korea – are slowly turning to portfolio management and fixed income.
“Asia fixed income is an important strategy for us,” he states. “We already have an Asia ex-Japan bond fund, but until now we have not had a credit team in the southern half of Asia.
“So we will be doing more in Asia and emerging-markets fixed income, and we will focus on the higher-quality countries where the currencies are stronger.”
McCarthy estimates that Nikko AM has more than 400 funds on its platform – a breadth of product he says helped see the private firm through the famine of the global financial crisis.
He adds that 80% of what the firm is doing now is replicating (with tweaks) existing funds with track records and registering them in local Asian markets.
“Worldwide there is a series of emerging-market funds that we want to move around on the currency side,” says McCarthy, noting that 70% of the products it sells in Japan are not yen-denominated.
“What we have built the brand on for the last five years is selling growth countries – Brics and the next 11*," he adds. "We will focus on what people want, and in our view that is a combination of Asia fixed income, Asia dividend and growth countries.”
The DBS AM acquisition conferred several benefits on Nikko AM, including a product development team, a salesforce and access to distributors, including DBS Bank itself.
It also delivered a Hong Kong type-9 securities investment licence, which Nikko AM had held off from applying for in the knowledge that DBS AM would deliver this prize.
McCarthy points out that Nikko AM is now in the process of transferring three fund managers from Tokyo to its office in Hong Kong.
Overall, Nikko AM now has 654 staff, of which 158 are investment professionals. If you include its joint-ventures, Rongtong Fund Management in China has 147 staff (45 on the investment side, and over $7 billion in assets); Malaysia's Hwang-DBS has 131 staff (20 on the investment side); and Asian Islamic Investment Management has 12.
Given that Nikko AM also purchased Tyndall Investments in Australia this year and has ambitions to expand further in Asia-Pacific – a region McCarthy prefers to define as a multi-local marketplace – further acquisitions are a strong possibility.
McCarthy confirms interest in establishing a foothold in Taiwan, South Korea and Indonesia, as well as growing its fledging tie-up with Ambit in India.
“We already have a critical mass of countries," he says. "Around 30% of our AUM and about 35% of our employees are now non-Japan and we want to keep growing that, as well as growing Japan."
“We have to know the local team, understand distribution and also the local team has to want to do it, at a fair price," adds McCarthy. "We are always looking and talking, but these things either come up or they don’t. It’s dangerous to approach it from a corporate standpoint, putting flags in countries.”
He suggests further alliances with onshore domestic organisations are a more likely prospect, although he refuses to rule anything out.
However, when quizzed about a possible listing – AsianInvestor reported that one was likely in Tokyo this year – McCarthy seeks to avoid adding to speculation, while stressing the firm is in no hurry.
“There is a brand element to [listing], given that so much of Asia seems to think an asset management company is just a department of a bank," he says. "The attraction of a listing would be getting attention around an asset manager.”
He adds that Nikko AM has over half a billion dollars in cash, and no debt, and as such it is well placed for another acquisition.
* The next 11 were first identified by Goldman Sachs as Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey and Vietnam.