BNY Mellon will launch a separately managed account (SMA) business in Hong Kong later this year, its first in the region, with a view to tapping private bank clients.
The $1.4 trillion US investment management and services firm, which received the required licence from Hong Kong’s Securities and Futures Commission in June, is now looking to partner with private banks through its Hong Kong SMA business.
“Asian private banks are very well positioned to help drive separately managed accounts in a region where there has been tremendous wealth accumulation but not much management of what’s been accumulated,” says AJ Harper, president and CEO of the Hong Kong platform.
He cites an increased interest amongst wealthy individuals for access to, and transparency and control over their assets. The private banks would offer SMAs using BNY Mellon's platform for their discretionary portfolios, he says.
In addition to partnering with private banks, the firm is looking to partner with leading asset managers to provide the SMA strategies, with Harper noting that BNY Mellon expects it will be one of the managers on the platform.
Harper tells AsianInvestor that he believes this separately managed accounts business will be the first of its kind in the region.
Like other similar businesses in the US, BNY Mellon’s new Asian unit will provide investors with full disclosure, allowing them to view “line-by-line security-level holdings with complete transparency” in strategies managed by third-party asset managers, he says.
“What’s unique is the ability to enable the private banker to tailor third-party investment strategies by market, sector, theme and base currency and have the line-by-line stock-level reference for those securities,” Harper says.
For example, if a BNY Mellon SMA had 30 to 50 transparent positions with equity exposure to securities listed in Hong Kong, Europe, the US and Australia, the investor would be able to see those positions based in the currency of the market the security is traded in, as well as the base currency selected for their account. This allows investors to view the value of the holdings in their portfolio in the currency the stock is listed in, as well as the base currency.
He notes that the SMA business, which will begin operating later this year, will be particularly appealing for high-net-worth individuals as it will offer investors access to leading global and boutique asset managers for $1 million or less, significantly less than what’s available to institutions in the region, which often have a minimum investment of $100 million.
The SFC licence will allow the firm to offer the SMA capabilities through Hong Kong, and will eventually be expanded into other countries in the region, Harper adds, although he declined to say which countries.
On the strategy, Harper says: “We’ll build something offered here in Asia that reflects the Asian investor need, with regional as well as market-specific strategies. As for international exposure, we’ll offer global strategies that can exclude Asia.”
The firm will also introduce fixed-income strategies onto the platform in 2014, although Harper declined to offer more specifics. He also declined to say how much AUM the SMA business will launch with.
The SMA subsidiary has been bulking out its Hong Kong office for the past year-and-a-half, and will continue to add executives focused on business development, investment advisory, product delivery and client services.