As part of a revamp of its Asia team, Deutsche Asset and Wealth Management (DeAWM) will move its chief investment officer for emerging markets, Sean Taylor, to Hong Kong from London next April. The EM team will continue to be based in Frankfurt, but up to five staff will also transfer to Hong Kong.
The move reflects the region’s big contribution to EMs’ overall market capitalisation, noted Ravi Raju, DeAWM’s Asia-Pacific head, who himself relocated to Hong Kong from Singapore in August. (China, South Korea and Taiwan accounted for 46.37% of MSCI’s EM index as of October 30.)
However, contrary to media reports last week, the firm is not moving its regional headquarters from Singapore to Hong Kong, said Raju. Rather it is sharpening its focus on North Asian institutional and ultra-wealthy investors with investable assets of more than $20 million.
It is also looking to strengthen its fixed income team in Hong Kong after the hires of Elke Schoeppl-Jost in January and Henry Wong in April from BEA Union Investment as CIO and fixed income head, respectively.
While DeAWM is not yet moving into the high-net-worth or mass-affluent markets Asia-wide as yet, Raju said, it is looking at them with interest. But it plans to build out its platform and technology for the next three to five years before it will be in a position to move on that front.
One driver of the bigger focus on North Asia is that institutional clients in the region are starting to diversify more outside their domestic markets, freed up by liberalisations and spurred by potentially higher yields, Raju said.
Though Chinese insurers have been slow off the starting block, he expected to see them branch out meaningfully in the next five to 10 years. “We have spent a lot of time with these customers, investing in education, showing them how we manage assets for institutions worldwide,” he added.
The move to strengthen capabilities in Hong Kong is part of a wider integration programme that has been taking place over the past two-and-a-half years.
This comprises consolidation of its once disparate asset-gathering businesses, said Raju. Previously, the firm had been run globally along product streams, including German retail and an institutional franchise in the US, for example, and wealth management operated as a separate business.
The integration has seen DeAWM combine the bank’s active, alternative and passive AM activities, as well as its retail and institutional distribution functions. In the third quarter of this year, the integrated entity reported new net inflows of €17 billion ($21 billion) globally, of which €5 billion came from Asia.
The regional strategy has been to build coverage in certain areas and exit others. “We were dabbling in a lot of sub-scale onshore businesses,” said Raju.
For example, Deutsche Bank sold its Philippine trust business to Banco de Oro in February this year, although DeAWM continues to sell offshore global product to customers in the country.
Other banks and asset managers have made similar moves, as it has become more difficult to penetrate local retail markets in Asia. Regulators are seen to be tightening restrictions on offshore funds and looking to boost their domestic fund industries. China and Taiwan are two examples, and Asia’s three planned passporting schemes are designed to help build up domestic asset management industries.