Fund houses eye Middle Eastern wealth

Asia-based investment industry CEOs are exploring how to tap institutional capital and rich individuals in the Middle East.
Fund houses eye Middle Eastern wealth

At a behind-closed-doors roundtable* in Singapore last month, senior investment executives discussed the potential for drawing on the substantial pool of Middle Eastern wealth.

The Singapore-based heads of Oclaner Asset Management and Tokio Marine Asset Management International said setting up partnerships with local fund houses or distributors is the way forward.

But Shashank Srivastava, acting CEO of the Qatar Financial Centre Authority and host of the event, disagreed, arguing that a greater commitment is necessary.   

Yoshihiro Matsuzaki, CEO of Tokio Marine AMI, says: “We want to provide our Asian equity and fixed-income products to Middle Eastern clients, because interest is growing from that region in Asian assets. We perhaps have to find a good partner in the region to help us access the market, both for asset management and distribution.

“We see some demand [for Asian products]," he adds. "For example, sovereign wealth funds are using consultants, so if you have a good rating with consultants already, you have a good chance of doing business there.”

But on the retail side, Tokio Marine AMI definitely needs a relationship with retail or private banks, says Matsuzaki, and it is in talks with several candidates on that front.

Others make a similar point. “I agree with Yoshihiro on the need to strike alliances,” says Ivo Bartoletti, CEO of the Singapore office of Oclaner AM, which provides investment and wealth management services to family offices.

“We have done several studies on the private wealth business [in the Middle East], because we are exploring the option of opening an office in the Gulf,” adds Bartoletti. “The challenge is to find the right partner and expertise.”

But QFC Authority’s Srivastava counters: “Setting up a partnership seems to be on everyone’s mind as a logical way to get into the Middle East. But we haven’t seen this happen very much. The reasons for that I’m not entirely sure; I can only speculate.

“The impression I get from several international firms is that they don’t find strong partners,” he notes. “So you actually find that a number of the international firms do it the hard way – having the patience to set up an office, finding the people, building the relationships.

“But the market is not for the faint-hearted; you have to make a long-term commitment.” Srivastava adds that QFC Authority offers a seeding programme for asset managers that wish to set up a presence in Qatar.

Aviva Investors is also looking at how to tap the wealth of rich individuals in the Middle East, and it is a long haul, says Tahnoon Pasha, Singapore CEO. The UK firm already has a branch in the Dubai International Financial Centre, through which it writes business with sovereign wealth funds and other institutions in the region.

Meanwhile, the firm is trying to figure out the best channels for tapping the private banking space in the Middle East. “It’s not necessarily an easy one to break into,” notes Pasha. “We talk about sales cycles in Asia being relatively long – say 24-36 months – but the sales cycle tends to be even longer in the Middle East, from a trust-generation and relationship-building perspective."

Meanwhile, firms such as Malaysia's RHB Investment Management are eyeing the Middle East as a market for their sharia-compliant products.

Discussions are ongoing with private banks from the Middle East and Switzerland, and they are looking more and more into Islamic investment solutions, as a lot of their funds have been heavily invested in the Western world, says Anthony Siau, head of strategic business and market development at RHB IM.

“But that is no longer a practical solution after the recent financial crisis, so they are trying to shift funds into Asia and, if possible, into sharia-compliant assets,” he adds. “So the plan now is to continue to strengthen our Islamic capabilities.”

Certain firms may even consider putting investment – as well as sales – staff on the ground in the Middle East in the future.

We are India-focused and can provide solutions, leveraging our parent’s strength, across the spectrum of equity, fixed income, real estate, private equity, etcetera out of our international manufacturing hub in Singapore,” says Anu Sahai, CEO of Aditya Birla Sun Life Asset Management, the international arm of India’s Birla Sun Life AM.

“But we wouldn’t rule out putting non-sales staff in the Middle East and focusing on investing in other geographies in future,” she adds. “We wouldn’t look at partnerships necessarily as joint ventures, but we could partner with local players to co-develop markets together.”

* The full article will appear in the forthcoming (July/August) issue of AsianInvestor magazine.

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