BNY Mellon Investment Management has shut down its separately managed account (SMA) platform and laid off up to 50 staff in Asia, sources have told AsianInvestor.
The closure represents an embarrassing loss of face for the firm and its Asia-Pacific chief executive Alan Harden, who has been hell-bent on hiring to build out its wholesale offering.
As a result questions have been raised over Harden’s future at the firm. Asked whether he would stay on as regional chief, a company spokeswoman said Harden would continue to drive growth in the business in Asia Pacific.
It comes in the wake of activist shareholder pressure in the US at its parent, Bank of New York Mellon, where they have been pushing to improve operating performance across the board.
The Spectrum SMA platform, originally run by AJ Harper, was introduced to offer high-net-worth individuals access to SMAs for as little as $1 million, well below the typical $100 million minimum for institutions globally.
In January last year BNY Mellon IM succeeded in signing up its first five external fund providers to the platform: BlackRock, Capital International, Henderson Global Investors, Lazard Asset Management and UOB Asset Management. They saw it as a new distribution channel, as reported.
However, it appears the Spectrum business failed to take off with third-party distributors, chiefly private banks, and has now been shut down, nearly three years after BNY Mellon IM started working on it.
“Anyone who is surprised by this [shutdown] has had their head in the snow for a long time,” one industry source told AsianInvestor. “BNY scored some wins getting providers on the platform. But it was like having a torch with no batteries. You can have as many providers as you like, but if no one is buying it, it won’t make money.”
Other sources lamented the failure of its SMA business, suggesting it was ahead of its time. Yet at the same time they criticised BNY Mellon IM for hiring an excessive number of sales staff, racking up costs when the revenues didn’t justify it.
“It has been a disaster, they have thrown away $50 million to $60 million,” said a senior industry figure based in Hong Kong. “It won’t affect BNY Mellon as a whole, which is especially well known for its asset servicing business. But it is embarrassing and has been costly.”
The BNY Mellon IM spokeswoman told AsianInvestor subsequently that the amount referenced was incorrect and the amount spent on SMA was substantially lower than $50-$60 million.
Managing directors understood to have departed BNY Mellon IM in the past few weeks include Chris Faddy, head of distribution for managed investments; Mark Speciale, head of distribution Asia Pacific; and Richard Collis, who ran insurance and pensions. The future of Guy Uding, managing director for investments, was also uncertain.
“They [senior staff] have just been given the push,” said a source. “Others were told to go back to their desks and wait to know whether they had been given the push as well. About 30 people in Hong Kong have been let go, and 20 in Singapore. All the people connected with the SMA platform have gone.”
Sources suggested BNY Mellon IM was now retrenching to what it had four years ago in the region: a suite of boutique fund houses combined with institutional sales staff.
However, the company spokeswoman stressed this was not the case and that BNY Mellon IM was continuing to grow in the region, with its AUM having nearly doubled from $56 billion to $103 billion over the past four years.
“To ensure we can sustain this momentum over the longer term and improve operating margins, we are making some organisational changes to better align our investment management resources to future growth,” she told AsianInvestor.
She noted that as part of the changes, the firm had decided to realign its resources to reflect a sharper focus on institutional opportunities across the region.
Late last year AsianInvestor reported that BNY Mellon IM was considering the future of its retail business in Asia after seeing departures from its mutual fund operation and carrying out a restructuring.
However, the spokeswoman denied the firm was withdrawing from wholesale business. “We are continuing to focus on intermediary opportunities in the region, we are not withdrawing from that. We are fully committed to the region,” she said, adding the firm was seeing growth in its wealth management business in Hong Kong.
She declined to talk about the firm’s SMA platform or about the position of individuals at the firm other than Harden.