The Dutch pension asset manager's Asia Pacific head of real estate says his team has just had one of its busiest years ever and that 2021 is looking similarly promising.
Best known for the Dow Jones Industrial Average, Dow Jones Indexes offers thousands in indexes with more than 12,000 securities in various asset classes across more than 60 countries. Dow Jones Indexes is a unit of Dow Jones & Company.
In a recent visit to Hong Kong, Princeton-based Dow Jones Indexes president Mike Petronella and Singapore-based senior director for sales Sumeet Nihalani spoke with AsianInvestor about the companyÆs ongoing efforts to expand in Asia. Nihalani serves as the head of the companyÆs operations in the region.
What are your plans for Asia?
Petronella: The Asia business is relatively new. We have been doing indexes at Dow Jones since 1997. We have become much more serious about the Asian region in the last 18 months. Our initial push was naturally the US and Europe.
WeÆve gotten much more interest out of Asia since we have staffed the region. Eighteen months ago, we had a grand total of one person in the Asian region, based in Hong Kong. Now, we have 20.
What do the 20 people do?
Petronella: They are operations people who do index development and index maintenance. Others are in sales, marketing and support. Our base in Asia is in Singapore.
Where else are you present in Asia?
Petronella: Hong Kong, China and Singapore. We will soon have a presence in India and Dubai.
What happened over the past 18 months that made you decide to have a bigger push in Asia?
Petronella: There is demand. What has become very apparent is global asset managers are looking towards emerging and frontier markets in Asia for performance.
We have always had a complete index family but we are adding more countries and the countries that we are adding are increasingly, like the China A-shares market, small. It is important, on a market capitalization basis, for us to be adding more and more of those countries. Now we have 63 countries covered worldwide.
When an asset manager is creating his portfolio, you donÆt want an index family to be missing things. ItÆs not so much whatÆs important to us but whatÆs important to asset managers. We donÆt have an opinion. WeÆre market driven. But we want to make sure than our index family is as complete as possible and that means covering more and more countries as they become transparent enough.
Other providers like MSCI and FTSE came to Asia way ahead of Dow Jones Indexes. How are you going to compete with them?
Petronella: There is a wide client base in Asia. The client base is finite. In other markets we share clients. It wonÆt be any different here in Asia. We have products on the commodities side and other products in the Dow Jones brand that they simply donÆt have. Of course we have the DJIA, which MSCI and FTSE donÆt have. We have a very popular commodity family used globally by asset managers.
WeÆll compete for the same clients in different products and sometimes in the same products. There is always room in the world for more than one. From a competitive standpoint, it really doesnÆt concern me that they were here first. The markets continue to mature and continue to change, which means that there is consistent opportunity that presents itself.
What kinds of products are your clients in Asia looking for?
Nihalani: Funds, ETFs, mixed-basket products, customized products, and another thing we have been very successful with in Asia is Islamic products. We are the leaders in Islamic products in Asia. It is quite possible that 98% of assets under management in the Islamic funds business would tend to be from the Dow Jones Islamic Index family. The gap between us and the next guy is huge. [Dow Jones Indexes was the first index provider globally to launch sharia-compliant indexes in 1999. It has more than 80 Dow Jones Market Indexes covering equity and fixed-income securities globally.]
Looking ahead, are you going to focus on Islamic products in Asia?
Petronella: We identify new opportunities. ThatÆs our job. We talk to the market makers, the asset managers, we see what their investment appetite is and where itÆs going and we try to serve that need.
How do you react to others who say that there should be a move away from benchmarks?
Petronella: I donÆt think that you necessarily have to move away from benchmarks. There is always room for more diversification in a portfolio. Core satellite investments can mean a lot of things. It can mean you have a core of equities and other satellite classes. In a benchmark sense, you can have your money benchmarked to free float market cap-type indexes. But maybe there are portions of your portfolio that you would want to follow in a different strategy.
What have been the major challenges you have faced over the past 18 months?
Petronella: The diversification of Asia. ItÆs broadly dispersed and weÆve really initiated relationships. This is a business built on relationships. The challenge there is to make the inroads and convince the client base that we have a real commitment to Asia. Our goal is to continue to build our staff.
Our business in Asia has doubled in the last year in terms of number of licensees, assets under management benchmarked against our indexes, number of products, and revenue growth.
Which markets have you been able to penetrate more in Asia?
Nihalani: We donÆt have a physical on-the-ground presence in Malaysia but we have been very successful there. The only place in Asia where the environment is more challenging for everybody is obviously China. We are adopting. In some cases, we will be able to satisfy local demand, in some cases we wonÆt.
Petronella: We have 10 operations staff in Beijing in index development, maintenance and customer support. The goal is to have 12 by the end of the year.
Nihalani: You have to be sensitive as far as Asia is concerned. There are some markets where there are regulatory challenges. There are some markets that are waking up late. Malaysia is waking up very late in the game of Islamic finance. There are economies with exposure to the US and there are some with little or no exposure to the west.
Are you most successful in Malaysia?
Nihalani: It would be fair to say that it is one of our most successful markets, but itÆs mostly Islamic finance.
Which other markets do you expect most of the growth to come from?
Nihalani: We are doing very well in Singapore, Hong Kong. In the future, we expect to do very well in markets like China and India.
How will the US financial crisis affect your business globally, and in Asia?
Petronella: Certainly it will affect our business, our clients and our financial services units. In order for us to grow, we create indexes and we license them to the financial services units and they create the product. If there is a retraction in product issuance, that will affect our business. I think there are more questions than answers at this point about where this current trend will go.
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