US asset manager Eaton Vance received a licence last week to conduct fund management in Singapore, having opened an office there late last year, and is busy developing its business in the region.
The move reinforces the firm’s pan-Asia build-out following this month’s hire of Scott Lawrence in Melbourne as the first managing director for Australia at Eaton Vance subsidiary Parametric.
Eaton Vance, with $184.5 billion in assets under management, is focusing in Asia-Pacific on marketing bank loans, US high yield, structured emerging-market equities and global macro absolute return, says Rob White, Singapore-based president of Eaton Vance Management International (Asia).
He says the firm is seeing interest – particularly in Japan, Singapore and South Korea – in its global macro strategy, which has been run by the same manager since its launch in the mid-1990s. The strategy focuses on country selection and positioning, investing in currencies, interest rates, credit default swaps etcetera. It has achieved annualised returns of 4.5% over cash for the past five years on a volatility of 2.85%.
Bank loans – of which Eaton Vance is the oldest manager globally with close to $24 billion in AUM – are also attracting interest, says White. In light of this, the firm hired Jason Jung as a credit market analyst in June last year from Riyad Bank in London and located him in Singapore.
“We are not only aiming to raise assets for the bank loan fund, but also to scope out Asia-Pacific credit markets to support the bank loan and high-yield team in Boston, and to find attractive regional investment opportunities for our global funds,” says White.
“There’s not really a market there now, but regional growth, bank balance-sheet constraints and many other factors in Asia suggest a more active secondary loan market will evolve at some point in the future, as evidenced in the US and Europe in the 80s and 90s.”
The firm already has numerous bank clients in Japan investing in this strategy, says White, and it is seeing demand from pension funds and asset consultants there. It also has a partnership with Mizuho Securities to distribute its bank loan products and plans to expand distribution capabilities to include the broader Eaton Vance/Parametric product offerings in Japan.
Korean pension funds and other institutional investors are also showing interest, says White, given that domestic interest rates have now fallen to the point where better returns can be extracted from bank loans and US high yield. Many such entities cannot yet invest in sub-investment-grade assets, but Eaton Vance is seeking to raise local understanding of the floating-rate bank loan market.
The group is also marketing Parametric’s flagship emerging-market equities capabilities and other ‘structured active’ funds such as global equities and commodities, which combine active and passive investment approaches. White says Parametric’s $10 billion-plus structured EM equities strategy has outperformed the MSCI EM Index by 3.9% annually over the past 10 years on a lower volatility.
Eaton Vance also sees significant opportunities in Parametric helping Australian superannuation funds to manage their capital gains tax exposures. This has become an issue for these funds following the Cooper Review of the super industry released in July 2010. Parametric provides tax-optimised solutions to the high-net-worth market in the US and is now applying some of the same methodology and its proprietary technology to manage Australian funds' exposures.
Meanwhile, in addition to its distribution capabilities in Japan, Eaton Vance is looking at pursuing joint-venture arrangements in South Korea and possibly other Asian countries such as Malaysia, Thailand and Indonesia.
Local distribution agreements with banks are the most likely outcome, at least initially, says White, but there is potential for collaboration whereby local Asian firms make use of Eaton Vance’s distribution capabilities in North America. It is likely the firm will sign at least one agreement in North Asia this year, he adds.
On the private banking side, Eaton Vance’s relationships with international private banks, particularly in the US, make it easier for the firm to get on product shelves for distribution in other regions, says White. “Typically this entails a further layer of regional due diligence,” he notes, “but our physical presence in Singapore means we are well placed to service both existing and new clients.”
Further regional expansion in terms of setting up offices is not on the immediate agenda, but there are longer-term plans to build up the presence as opportunities present themselves.
Eaton Vance would consider putting a presence in Hong Kong at some point, says White, with a view to strengthening access to China and North Asia as a whole. “But it’s not going to happen in the short term,” he adds.