BrightSphere shuts Hong Kong branch as assets plunge
BrightSphere Investment Group is closing its Hong Kong sales office following a change in leadership and strategy at the fund house's US headquarters. The move comes after it recorded a first-quarter plunge in assets under management amid the Covid-19 pandemic.
The multi-affiliate firm will retain branches in Asia via at least two of its subsidiaries, equity specialist Acadian and secondaries alternative asset manager Landmark Partners, which will continue to service their largely institutional clients in the region.
Boston-based BrightSphere, rebranded from Old Mutual Asset Management in 2018, had also been trying to build up its regional business through the Hong Kong umbrella sales office. In December it had hired a new head of Asia, Michael Han, who is now moving on, along with the remainder of his team.
This comes after BrightSphere moved last month to replace its global chief executive and announced it would transfer all responsibility for its product strategy and distribution to its affiliate managers.
A BrightSphere spokesman said the closure of the Hong Kong office was not related to the pandemic, but the result of the transfer of responsibilities to its affiliates.
Like many asset managers, BrightSphere has suffered during the volatility surrounding the pandemic. Its global assets under management fell by a fifth in the first quarter to $161.8 billion from $204.4 billion, driven by the Covid-19 market crash, it said in a release on May 7.
However, its AUM had been steadily declining before the onset of the pandemic, from $249.7 billion at the end of 2017.
The most recent quarterly drop in BrightSphere's AUM underlines the huge impact on both financial markets and investment businesses being wrought by the virus. US funds giant BlackRock, for instance, saw its assets drop by $1 trillion (13%) to $6.47 trillion in the first quarter.
On the positive side, BrightSphere recorded a first-quarter net asset inflow of $1 billion on the back of growth in gross sales, particularly in quantitative strategies including managed volatility, non-US and factor-driven strategies.
The firm declined to provide AsianInvestor with a figure for net flows for its Asia business.
As for BrightSphere's Asia headcount, Han and Greater China head Bryan Yip are the only two licenceholders left in the Hong Kong umbrella office, according to the territory’s Securities and Futures Commission. The spokesman declined to comment on when they would be leaving.
Ryoo Dong-Hoon, who had overseen Korean clients as director of institutional business for Asia ex-Japan, had left in December, after Miranda Poon, formerly Asia head of institutional, exited in June last year.
There has also been a recent leadership and strategy shake-up at head office. BrightSphere promoted Suren Rana to chief executive and president from chief financial officer on April 16, to replace Yang Guang, who had been chairman and CEO since December 2018.
BrightSphere's new CEO
In a statement on Rana’s appointment, new chairman John Paulson said: “As we look to grow our assets, we have found that tailored efforts led by our affiliates directly, rather than centralised efforts, have been the most productive.”
Hence BrightSphere will focus its distribution and product development efforts at the affiliate level and will cease the “supplemental efforts” at corporate headquarters.
“We cannot really pin down exactly when those mandates will come through,” Yang added at the time. “But … the focus for us is really try to contemplate long-term relationships with those institutions across different products, not just one product.”
While falling markets have affected BrightSphere, its assets have also shrunk as a result of sales of affiiliate firms in recent years. It offloaded fixed income house Rogge Global Partners to Allianz Global Investors in 2016 and its 50% stake in property investor Heitman in 2018 through a management buyout.
Ultimately, BrightSphere is firmly in the mid-sized fund manager category seen as most vulnerable to the challenges of rising costs and downward pressure on fees. Hence many will view it as a potential target for other firms looking to build scale.
Indeed, in response to a question on its May 7 earnings call from an analyst asking how the firm would consider an approach to acquire one, or all, of its affiliates, Rana said it would consider "legitimate queries".
This story has been updated to clarify that Landmark Partners is a secondaries-focused alternative asset manager.