New York-based First Eagle Investment Management, a value equities manager with $38 billion of assets under management, is looking to expand distribution in Asia ex-Japan, to complement a new relationship with Japan's Nikko Securities.
John Arnhold, of the firm's founding Arnhold family, says September marked First Eagle's first sub-advisory deal in the Asia-Pacific region, running a global value strategy for Nikko. The firm also has a similar deal with Amundi (made with Société Générale Asset Management) in Switzerland.
"There's a lot of Asia we're not covering, and we'd like to continue to expand our distribution to the extent that it doesn't hurt our relationship with Nikko and SGAM," Arnhold says.
The other strategic initiative for 2010 is to identify teams with a track record in managing global credit with a stylistic tilt towards value, which First Eagle wants to bring in-house.
The firm already has an internal credit-analysis capability, which is a subset of its equity investment process. "We already analyse the capital structure for its impact on equities, but not for direct investment," Arnhold notes. "Often we end up owning the debt anyway [due to exposure to convertible bonds], so why not invest in it too?"
First Eagle and the Arnhold family have tended to view fixed income over the long run as a poor store of value, vulnerable to inflation and taxes. But Arnhold says that at certain periods of time, sovereign debt, credit and distressed debt can offer equity-like returns for less risk. First Eagle once had an emerging-market sovereign-debt portfolio but closed it in the early 2000s because it felt the narrowness of spreads didn't offer sufficient compensation.
The Arnhold franchise dates back to the 19th century in Dresden, but the family moved to the US in 1939, with the Nazis having confiscated their business. "We lost everything once, and that's why we're value investors," Arnhold notes.
The firm is among the first in the US to have a dedicated exposure to non-US equities. It has long been able to invest in emerging markets, but struggles to find compelling value. Asian markets are so concentrated on a few sectors -- such as oil, utilities and financials -- that the firm struggles to mitigate concentration risk.
First Eagle also maintains an exposure to gold, as a hedge. Within its equity portfolios it will also maintain an allocation to hard assets such as oil or copper.
Late last year, the firm changed its name to First Eagle, after a longstanding series of mutual funds called First Eagle. It says the change was meant to highlight its commitment to being an independent asset manager. While it has been independent since 2002, the firm was once part of a banking and brokerage group.
John Arnhold insists he didn't mind taking his name off the door.