Dancing with the dragon
Much of Asia has just celebrated the arrival of the lunar new year. We welcome the Year of the Snake – usually 12 months of upheaval, but for the black water snake, a year of innovation and progress. They only come around every 60 years, so my wish is that everyone makes the best of it.
Dragons are always difficult customers, as our stories from the past year demonstrate. The epitome of power, dragons make powerful allies and dangerous enemies, and this past year has witnessed plenty of advances and setbacks for global finance. Bond investors rode the dragon to prosperity… but many with the help of leverage and perhaps at the market’s peak. Don’t take dragons for granted!
The year was full of incredible stories in Asia’s asset management landscape, and AsianInvestor was at the vanguard of reporting and analysis. Here are a dozen examples selected by us – not necessarily articles that were the most popular, but the ones that revealed something crucial about the industry or provided valuable insight to our readers. If there’s a theme, it’s how the China story is the main shaper of asset management in Asia.
12. BlackRock hire of China chairman critical: McCombe
By Leigh Powell, 16 January 2013
This story captures two trends. First, the ongoing transition of high-profile bankers to the asset-management industry; second, the need for global firms to develop a China strategy. Mark McCombe, BlackRock’s Asia-Pacific chairman, came from HSBC. One of his biggest moves was the hire of Wang Hsueh-ming from Goldman Sachs as chairman for the China business. At the world's biggest asset manager, Wang will oversee a variety of activities that, due to Chinese regulation, remain separate, including institutional sales, retail sales, the ETF business, a funds joint venture, and advisory work. She made a name for herself at Goldman as an adviser to many China restructurings and privatisations. In this regard, BlackRock is probably closer in its China scale and ambitions to investment banking rivals such as Goldman and UBS than to other asset managers.
11. Bailey to exit ING IM as sales process stalls
By Leigh Powell, 11 October
We have run plenty of stories that capture how asset managers affiliated with larger financial institutions are struggling: among them, Overhaul of Credit Suisse AM raises questions, by Joe Marsh; and GSAM closure in Korea ends Tong Yang deal and Kai Sotorp returns to run UBS Global AM by Jame DiBiasio. The combination of tough trading conditions and financial group restructuring in the post-GFC environment continues to reshape the competitive landscape. Our biggest story in this theme was Leigh Powell's scoop on the breakdown of sale negotiations between ING Investment Management and Ameriprise Financial and the exit of ING IM Asia chief Grant Bailey. It is a striking example of how a good asset management business tied to a troubled Western parent faces extinction; ING IM's Asia businesses are now being sold off piecemeal.
10. More heads roll in transition management
By Joe Marsh, 15 August
BlackRock, Deutsche Bank, JP Morgan and Morgan Stanley all curtailed their portfolio-transition businesses in the region. Most beat a retreat to Australia, while BNY Mellon held off on hiring a TM head for Asia. Joe Marsh understood how investment banks in particular were leaving transition management because of the lack of liquidity and therefore the lack of flow business. This retreat was a casualty of a massive drop in market liquidity across the region’s equities markets, and the lack of activity among regional asset owners. And it is another reminder that the region’s promise often fails to materialise.
9. KIC appoints first Korean national CIO
By Lee Insup, 2 April
First AsianInvestor broke the story that American Scott Kalb would not be retained as Korea Investment Corporation’s CIO, despite having done a good job, when Jame DiBiasio reported KIC’s next CIO likely to be a Korean. Our Korean correspondent, Lee Insup, followed up with this story revealing that Don Lee Dong-ik would succeed him. Lee had been with KIC as managing director and head of its private-market group. His appointment demonstrates the growing maturity of the region’s young sovereign funds, as they can increasingly count on internal talent. A similar tale is to be found in Leigh Powell’s GIC promotes from within to replace group CIO.
8. CIC slams US regulation, accuses SEC of blackmail
By Nick Lord, 27 November
When Jin Liqun, chairman of China Investment Corporation’s investment board, delivered a broadside against US regulation at a forum in Mumbai, our colleague Nick Lord was there to report it. Jin called US regulation destructive and counter-productive, and the biggest threat to global growth. He went on to say that such regulation will drive away investment – no small threat from the man at the helm of one of the world’s most important sovereign wealth funds. It’s a brave new world for financial markets. In January this year another senior CIC executive continued in a similar vein, with Jesse Wang criticising US and UK regulatory change as “anti-globalisation” and challenging Hong Kong to step into the breach, as reported by Georgina Lee in Western over-regulation will drive investment to Asia: CIC.
7. Cashed-up GIC looks to take calculated risks
By Leigh Powell, 1 August
Leigh Powell’s analysis of Singapore’s Government Investment Corporation highlights the way big Asian investors are operating in the current environment. GIC is increasing its exposure to alternatives, including private equity and real estate. On the other hand its cash allocation rose from 3% to 11% year on year, demonstrating the mix of fear and long-term risk taking that such investors are capable of acting on. This story follows a number of others about the growing interest in alternatives among Asian investors, including Jame DiBiasio’s Expect Korea wave into alternatives. But Yvonne Chan’s HKMA emerges as possible investor in ailing CVC Capital is a warning that inexperienced LPs will find plenty of pitfalls in private equity.
6. Asia Alternatives targets China PE with $1.5 billion
By Yvonne Chan, 9 August
It’s been a tough environment for asset-raising by private-equity groups, but Hong Kong-based Asia Alternatives, a manager of funds of PE funds, closed a third fund with $1.5 billion of assets. Key to its fundraising success was its focus on renminbi-denominated PE vehicles in China, including strategies in growth, venture and buyout PE managers. That is thanks to its having secured a qualified foreign limited partner (QFLP) licence in 2011. Co-founder Melissa Ma says this is the first time her firm’s fund garnered such interest from Asia-based investors, instead of relying mostly on North America. The firm has opened a Shanghai office to serve as a hub for its RMB investment activities.
5. Post-crisis COOs turn to outsourcing for collateral management
By Georgina Lee, 20 April
Global regulatory changes are creating a pressing need in the derivatives world for collateral management, from upgrading the quality of collateral to simply getting investors hands on enough of it. Georgina Lee has been at the forefront of understanding the impact this is having on fund managers and banks. She has done a lot of work on collateral issues and the development of repo markets in Asia, such as in her stories HKMA launches RMB cross-border repo and Dim sum bonds tipped to boost nascent repo market, both of which highlight the centrality of China’s drive to internationalise its currency.
4. BlackRock building local fund ops in HK
By Joe Marsh, 21 November
Franklin Templeton is domiciling funds in Hong Kong in anticipation of doing more QFII business and other activities in mainland China, a move copied by BlackRock; Joe Marsh followed up with Amundi readying HK funds, opens in Taiwan. This marks a change in strategy for global firms, which have relied on Luxembourg- or Dublin-domiciled Ucits funds to tap Asian retail markets. Similarly, global custodians such as State Street and JP Morgan are moving away from purely cross-border activity to select onshore business models, enabling them to directly clear and provide custody in places such as Hong Kong and Singapore. The importance of this trend was underlined by Leigh Powell’s SFC unveils landmark cross-border RMB funds scheme, a huge development he further explored in RMB cross-border funds scheme: 10 key questions.
3. Schroders readies global macro launches, with Asia flavour
By Leigh Powell, 29 March
Schroder Investment Management made a priority of developing products specifically for Asian retail investors. The Opportunities Fund it launched in Hong Kong proved to be a best seller. It successfully merged the Japanese trend of income-distribution products with the revival of multi-asset funds in the West. Many other players have come out with similar products since. This particular one helped Schroders win an award from AsianInvestor because it shows how addressing Asian needs can be more rewarding than simply importing strategies developed for US or European markets.
2. Guo Shuqing’s call for retail flows: aimed at ETFs?
By Jame DiBiasio and Elva Muk, 15 January
When Guo Shuqing, chairman of the China Securities Regulatory Commission, announced his ambition to expand QFII and RQFII programmes boldly, it made a lot of headlines. What the rest of the media missed, however, was Guo’s announcement that he would work to allow retail versions of both QDII and RQFII schemes, which for now remain just for institutions. Implicit in his comments is the possibility of allowing some degree of daily liquidity in cross-border flows. This is a requirement if China is to join the MSCI Global Emerging Market Index, which would mark a huge leap forward in driving the internationalisation of the renminbi. Watch this space to see whether this goal is made explicit by Chinese authorities.
1. Private banks “lazy” on fund selection
By Joe Marsh, 22 June
For fund managers, the latest holy grail in distribution in Asia has been private banks. But thanks to Joe Marsh’s insider tales, this is more illusion than reality. He went behind the scenes among the private banks to learn what they really think about mutual funds and relationships with third-party managers. The upshot: it’s not about performance, but about cosy relationships between a coterie of managers and all of the banks, leading to a uniformity of product offering across the wealth management landscape. This story is a great example of AsianInvestor access, analysis and value-added delivery. It got plenty of hits from readers, too.