Nearly one year ago, BNP Paribas Investment Partners CEO for Asia Vincent Trouillard-Perrot spoke to AsianInvestor about his business strategy. Having arrived in Hong Kong in January 2008 (his second tour of duty here), he set his sights on building an Asian fund manufacturing capability from this region. His preference then was to either acquire a local business or lift out an Asian-specialist investment team from another fund house.
Plans were put on hold when Lehman Brothers collapsed and the worldwide asset management industry went into a tailspin. But now, one year after he first spoke with AsianInvestor, Trouillard-Perrot says he still has his sights set on the same goal.
"We are pushing forward with this strategy because I truly believe that it is important for us to have an investment team on-the-ground managing Asian assets. We need to have products designed by Asian specialists," says Trouillard-Perrot. "This is not only for our local clients in Asia, but also for the benefit of our clients in the US and Europe."
There are three ways BNP Paribas Investment Partners can pursue this goal of having an Asian fund manufacturing capability in this region, Trouillard-Perrot says. First, it could potentially take on fund managers and analysts from Fortis if it ends up acquiring it. Second, it could acquire a boutique Asian fund house with expertise in regional equities. Third, it could build its own team from scratch.
The first option depends on what happens tomorrow, when shareholders are expected to vote on a plan to sell 75% of Fortis to BNP Paribas. In December, shareholders won a legal challenge that blocked the government's initial plan to quickly sell the bank on to BNP Paribas.
The second option appears to be the most ideal, although much depends on whether Trouillard-Perrot and his team can find an Asian boutique fund house with the right expertise at the right price. Pre-crisis, one constraint was the limited opportunities, with hardly any boutique fund houses looking for buyers or strategic partners. The market for Asian boutique fund houses might have already improved, given the impact of the global financial crisis on asset management businesses. A key criteria in this search would be investment experience and processes. Whether a fund house has $2 billion or $10 billion in AUM is not the main consideration.
The third option is the option of last resort because building a team from scratch would mean not having a built-in track record of performance, a top requirement among institutional investors.
Trouillard-Perrot says that it's also possible that BNP Paribas Investment Partners could combine options one and two. He notes that it would take months to build a local team of Asian specialists no matter which option the fund house ends up taking, and thus, he has not set a specific timetable for meeting this goal.
It's not unusual for international fund houses based in Asia not to have on-the-ground fund managers focusing on investing in the region. A number of fund houses still adhere to the concept of having a centralised fund management centre, though are slowly leaning towards having a local investment team.
When asked why BNP Paribas Investment Partners (formerly BNP Paribas Asset Management) had not yet set up a local team, Trouillard-Perrot points to priorities. The business was, after all, first created to focus on servicing clients -- particularly institutional -- in France and the rest of Europe. And it appears that the fund house's clients weren't particularly clamouring for Asian assets, especially equities.
The firm is differentiating itself from its competitors with its business model of combining its own asset management capabilities with other investment managers, thus the name change to "investment partners" from "asset management". The business model is therefore a partnership with a multi-manager investment approach.
At present, BNP Paribas Investment Partners has a stake of between 27% and 100% in 19 fund management companies, each with a distinct investment expertise. These partners include New York-based bond specialist Fischer Francis Tree & Watts, London-based fund of hedge funds Fauchier Partners, and New York-based corporate credit specialist Fridson Investment Advisors. With this set up, BNP Paribas Investment Partners manages around $40 billion in Asia including Japan and Australia, out of a global AUM of $454 billion worldwide.
The fund houses that are in partnership with BNP Paribas Investment Partners maintain their independence.
"That's the way we want it," says Trouillard-Perrot. "We enter into a partnership [with a fund house] because they are good at what they do."
