Barings, the $338 billion fund house owned by US insurer MassMutual, has responded to the current challenging landscape by heavily cutting back its equity investment capabilities and refocusing its client coverage.
At least 10 equity investment professionals have left the firm in the past six months across Hong Kong and London, the two locations where most of them were located. The individuals include several division heads and lead managers, such as the heads of Asian and European equities and the lead manager of the Hong Kong and China fund (see box below).
Sales staff have also departed, including Gary Smith, the former global head of sovereign wealth funds and official instutions, and so has ex-Asia chief executive Gerry Ng. It is understood that Barings did not replace Smith, as it felt it no longer required an executive dedicated to the sovereign institution segment.
The changes look to be part of a rationalisation of the product offering and capabilities. Barings is to refocus on the core strategy of corporate debt, as well as on private markets, one executive familiar with Barings told AsianInvestor on condition of anonymity.
Babson Capital, a high-yield debt specialist, had formed the largest part of the 2016 merger of its subsidiaries Baring Asset Management, Cornerstone Real Estate Advisers and Wood Creek Capital Management under the Barings name.
“High-grade bonds were not a focus, and the public equity offering was not comprehensive,” said the unnamed executive.
“In my opinion MassMutual in 2015 wanted the new firm to be a universal asset management firm," he added, "but it is now clear that you can’t be that unless you have $1 trillion-plus [in AUM].”
Achieving that sort of size would have meant buying a much bigger firm, which may have meant giving up control, the source said. “Remaining small – and shrinking the all-player ambition – suits many of those in Barings’ second tier of management."
The situation now also begs the question: would Barings now be an attractive target for another asset manager looking to bulk up and add high yield know-how to its own business?
When contacted for comment on all the changes – and the rationale for them – cited in this article, a Barings spokeswoman declined to comment apart from to say: “We have a diverse and broad business with a focus across many asset classes from fixed income, credit, real estate, public and private equities, and solutions. We continue to invest in people and resources for each of our capabilities.”
Ultimately, however, mid-tier asset management firms are seen as particularly vulnerable in today’s low-yield environment. With greater downward pressure on fees, either huge scale or genuine product specialisation is now seen as essential. Hence the recent industry trend for consolidation.
Large institutional clients are reducing the number of external managers they use, looking for firms that can either do lots of things well or just one or two niche things very well. They have, on the one hand, been steadily shifting more money into cheap passive strategies for listed securities and, on the other, seeking to build up in-house teams to do more direct investment into private markets.
The challenges facing the funds industry were also starkly underscored by the latest cutbacks at Hong Kong-based Value Partners reported by AsianInvestor yesterday. Such woes have only deepened with the advent of the recent coronavirus-fuelled market turmoil. More pain seems inevitable.
BARINGS’ BIG CLEAROUT
The departures from Barings since September last year include staff from different areas of the business, but above all from equity investment desks in Hong Kong and London. There were a few hires over the period as well.
A Barings spokeswoman declined to provide details about any of the arrivals or departures.