BNY Mellon Investment Management is on the hunt for more alternatives and equities expertise, and in talks on sub-advisory partnerships, says Alan Harden, Asia-Pacific chief executive.
He outlined his business plans to AsianInvestor last week. This followed the firm's decision last year to shift its focus away from the retail business in Asia and the October launch of a private bank operation in the region to add to its already established Spectrum separately managed account business.
“We are very keen to build more specialist manufacturing in Asia by bringing in new teams or portfolio managers,” Harden noted.
Institutional investors in Asia are increasingly looking to diversify beyond traditional assets. Japanese institutions, for instance, are getting more specific about their allocations, he said, which suits his firm’s multi-boutique set-up.
Yet while fund managers’ biggest nominal revenues come from institutional clients right now, noted Harden, that may well change in the coming three or four years. He said higher nominal revenues are likely to come from the private wealth business in future.
However, mass retail is too costly and burdensome a business from a regulatory perspective in Asia, added Harden. Hence BNY Mellon IM's shift in focus away from that business and its move to seek sub-advisory relationships, which would involve the firm advising other fund houses on running portfolios.
“The complexity of regulations now – and the time it takes to get products approved – led us to decide this will not be a focus for us in Asia,” said Harden, apart from in Japan.
Indeed, he sees regulation as the biggest challenge for the asset management industry in Asia now – whether it is the Volcker Rule or Foreign Account Tax Compliance Act (Fatca) out of the US, or local product-selling regulations.
The Volcker Rule curbs banks' proprietary trading, while Fatca requires countries outside the US to report financial-account details of American citizens to the US government.
Harden said: “There’s a significant potential risk that the unintended consequences of increasing regulation – across each country – will mean the investor gets nothing but a homogeneous, boring product at the end of the day.”
The market could end up with many lifestyle, time-dated type products and fewer products that help individuals create wealth, he added. “It’s about the average person being able to make enough money to retire – not just the wealthiest clients making more.”
The time it now takes to get a product to market means it could be a year out of date by the time it gets there, he noted. “That’s unfortunate for end-investors.”