As Tokyo-based Nikko Asset Management’s agreed takeover of DBS Asset Management nears completion, the Singaporean firm is gearing up for its role in the combined entity, including putting out products utilising both firms’ expertise.
“We’re awaiting final regulatory approval,” says Deborah Ho, chief executive of DBS AM. “Because we operate in Singapore, Hong Kong, Japan and have a joint-venture in China, coordinating all that takes a bit of time. But we’re confident it will get done within the next few months.”
Meanwhile, the wait for approval has given DBS AM time to prepare internally for what happens after “D-day”, adds Ho. “We’re planning for the future business as well, so we’re all working overtime at the moment.”
Ho will be the Singapore head of the combined business and will join Nikko AM’s executive committee in Tokyo. She has been an instrumental player in the merger deal and was listed in AsianInvestor’s recent pick of the 25 most influential women in asset management.
One step towards the joint business involves the recent launch of two funds in conjunction with Nikko: the DBS Japan Recovery Fund and DBS Asia Asset-Allocator Fund. The former will be managed by the Japanese fund manager; the latter will be managed by DBS AM, but will utilise the services of Nikko’s funds-selection group in New York.
The Japan fund completed its initial offer period and started trading on May 23 with $21 million (S$26 million). It targets accredited and professional investors in Hong Kong and Singapore. Following an opportunistic and absolute-return strategy, it makes investments in Asia-Pacific stocks (including those in Japan, Australia and New Zealand) that could potentially benefit from economic recovery in Japan.
The asset-allocation fund closed on June 21 with S$27 million and actively adjusts its asset allocation in response to changing market conditions.
Meanwhile, after signing the Nikko deal, DBS AM in November launched an offshore renminbi (CNH) bond fund targeting accredited and professional investors. It is already one of the firm’s biggest funds, with S$220 million ($180 million) in AUM as of April 30, having opened with S$100 million some six months ago.
The firm didn’t put together a mass-retail fund due to its concerns over the initial dearth of CNH issuance, says Ho. “We need to make sure we’re invested, but we don’t want to be forced to stay fully invested,” she explains. “We are happy to stay in cash if need be, but it’s harder to explain that to retail investors.”
Ho notes that there’s now a substantial amount of CNH issuance, but the fund must be selective over what it buys.
Under the merger plan, DBS AM will be the investment hub for Asian markets excluding Australia and Japan. “Nikko is very strong in Japan, but we add the Asian component,” says Ho, adding that the Singaporean firm has always been particularly strong in fixed-income products.
To what extent will the organisational structure change post-merger? Not a whole lot, says Ho, although Nikko has plans “to put some talent together”. “So if there’s talent in Japan that can augment the fixed-income capabilities at DBS, that’s great,” she says. “And this should mean we can transfer experience between firms and give all of us the opportunity to move to different countries for the group.”
The takeover of DBS AM, along with that of Australia’s $25 billion Tyndall Investments signed in November, is set to bring Nikko AM’s AUM to more than $150 billion. The main DBS AM business will adopt the Nikko name, but no decision has been made regarding the subsidiary joint-ventures.