Eastspring Investments, the asset management arm of insurer Prudential Corporation Asia (PCA), has overhauled its investment strategy in the face of major headwinds, resulting in further restructuring and more layoffs in the past month or so.
Like other asset managers, Singapore-based Eastspring has struggled to squeeze strong performance from value equity strategies in recent years. Moreover, the market environment had been getting steadily tougher for active equity managers even before Covid-19 struck, not least thanks to downward pressure on fees.
Eastspring has cut back its active equity capabilities and is putting more of a focus on quantitative and factor-based strategies. It is also pivoting away from direct alternative investing to rely on its fund-of-funds offering. It will retain alternatives as a key component in the solutions it tailors for clients, a spokeswoman said.
Two industry executives familiar with Eastspring said the strategic shift appears to be part of a tacit de-emphasising of third-party client fund-raising in favour of meeting the needs of its parent.
These internal changes led to the mid-May departure of equity chief investment officer Kevin Gibson, chief investment officer (CIO) for equities; equity portfolio managers Hugh Maxwell-Davis and Arthur Kadish; and client portfolio manager Ashish Dua. Gibson and Maxwell-Davis had been with the firm for some 15 and 12 years, respectively.
In addition, most of Eastspring’s alternative investment team has now departed. The most recent individuals to move on include Nadir Madruf, CIO for alternatives, and Lee Ka-Sing, who had focused on infrastructure debt. Lye Thiam-Wooi, director of loans, has also left. Several of them had been hired under former CIO Virginie Maisonneuve, who left in September 2019.
The direct alternative investment team had been formed in September 2017 when Maruf and Duncan Black joined from Daestrum Capital.
Separately, Margaret Weir, lead manager of the equity income fund, announced her retirement in February, the spokeswoman said. Portfolio manager Pearly Yap has assumed Weir’s former duties.
EQUITY TEAM RESTRUCTURING
Eastspring has now restructured its equity division into five teams in line with client demand and with a view to broadening and deepening its offering, the spokeswoman told AsianInvestor.
The teams include two new desks: beta solutions, led by Kenneth Tan, and core equities, headed by John Tsai. Beta solutions is a growing area of the firm’s business that will provide in-house solutions for index-tracking or rule-following funds, said the spokeswoman. 'Core equities' comprises equity income strategies for Asia, Asean and Greater China, she added.
The other three desks will retain their focus on emerging market and Asia value equities (led by Andrew Cormie); Japan equities (Dean Cashman); and quant solutions (Ben Dunn).
Eastspring’s alternatives division, which had already seen some departures last year, will now focus on an indirect, fund-of-funds approach and co-investment. Led by David Emes, it will remain key to the business, said the spokeswoman.
Direct alternatives investment is very long-term in nature and highly capital- and staff-intensive, so is a difficult business in which to build a track record. It would have been even harder to do so in challenging times such as today's.
Nonetheless, the spokeswoman claimed Eastspring was well set to move forward: "We are making these changes from a position of strength and setting us up for further sustainable growth."
The firm's results for the year to end-2019 show that its assets under management grew 15% to $241 billion. It attracted net external inflows of $8.9 billion and recorded an adjusted operating profit of $283 million, up 18% year-on-year, she added.
Certainly, Eastspring will hope these changes draw a line under a turbulent 18 months. They follow a restructuring at PCA in February this year, after which the insurer introduced a new regional operating framework, handing more decision-making autonomy to the local, in-country business units.
This shift came after the October completion of the demerger of Prudential’s Asia and US units from its UK business M&G. Additionally, during the course of 2019 Eastspring saw several senior departures, starting in January with those of its chief executive, chief financial officer and chief operating officer.
That said, PCA has also been moving to build out its regional presence. This included its support of Eastspring in acquiring Thailand's TMB Asset Management, which was completed in October 2018. Moreover, as of July 2019, PCA's Philippines division Pru Life UK was reportedly planning to launch an asset management firm in the country.
The story has been updated to indicate when the alternatives team was formed.