Dimensional Fund Advisors (DFA) sells most of its products globally via intermediaries, but in Asia has largely focused on institutional clients. Now the US systematic asset manager is moving to expand its distribution in the region through financial advisers and private banks. To that end, it is registering eight mutual funds in Singapore and has relocated regional director Joel Teasdel to the city-state.
“Registering Ucits funds as well as bringing Joel on board in Singapore will give us the tools to address Asian markets,” said Chen Peng, DFA's Asia chief executive.
Of DFA's eight planned products in Asia, six will invest in equities and two in fixed income. This reflects the global product range, which is 75% focused on equities and 25% on fixed income.
The firm hopes to have the funds registered in the next couple of weeks, but said the date would depend on the regulator. It can already sell products to accredited/professional investors in Hong Kong without having to register them.
Teasdel started in the new position on April 4, after doing a stint in the Sydney office and helping establish the intermediaries business in London. He joined the firm in 2006 and was previously an adviser at MLC Investment Management, the wealth management arm of National Australia Bank.
While it has portfolio managers, traders and salespeople in Asia, DFA has a “very small”, but growing asset base in the region, Chen said. The Singapore office – its first in Asia outside Australia and Japan – has a headcount of around 20, having opened in 2012 with three staff.
The regional intermediaries strategy mimics the approach the firm took in Sydney, London, Vancouver, Berlin and elsewhere, initially building adviser relationships before expanding its team on the ground. As the business grows, DFA will assess the need for more branches, noted Chen, with Hong Kong on the short list of additional locations.
Hong Kong and Singapore will be the main focus initially, but the firm may look to add other markets as the business develops, said Chen. DFA is in early talks with advisers and distributors in Asia with which it has partnerships elsewhere and is also looking at potential tie-ups with local and regional players.
Of DFA’s $388 billion under management globally, $243 billion is sourced from intermediaries, such as financial advisers and private banks. It does not have any direct-sale or traditional ‘mass-retail’ business because of the involved nature of its relationship with intermediaries. The firm spends a significant amount of time with advisers to ensure they are fully up to speed with its products.
Financial advisers account for a small segment of mutual fund distribution in Asia relative to banks, but their market share is growing fast. It was 14.1% in 2014, up from 7.9% in 2013 and 4.6% in 2012, according to Cerulli Associates.
Asked whether DFA would consider listing exchange-traded funds, Chen said that was not part of the firm's strategy. However, it would consider acting as a sub-adviser to ETF providers, as it does for John Hancock Investments, a subsidiary of Canada’s Manulife. John Hancock launched its first six multi-factor ETFs in September and another five last week.
DFA’s products are often described as smart-beta or factor-based funds, because they deviate from traditional market-cap-weighted indices. But the firm does not like that label – perhaps not surprisingly, given the recent negative press about such strategies.
“We shy away from the name smart beta,” said Chen. “It can be a marketing term, and it means a lot of things to a lot of people.”
Dave Butler, Austin, Texas-based head of global financial adviser services at DFA, stressed that the recent backlash against smart beta had not affected the manager's flows.
“There are subtle but important differences between what we and ‘smart-beta’ managers do,” he said. “Our financial adviser partners understand those intricacies, because we spend a lot of time with them. They can differentiate between what’s in the headlines and what we actually do.”
The firm declined to provide flow figures, apart from to say that its end-2015 AUM was $388 billion, up from $381 billion a year earlier.