“A lot of fund managers struggle with how to pigeonhole private banks; whether to put them in the institutional or retail business.”
This comment – from an Asia-based product selector at a large private bank – sums up the views of many of his peers, and indeed of some asset managers, in the region.
But fund houses are increasingly recognising that private banks demand a level of service way beyond that given to consumer banks*. There is a rising trend for global asset managers to build out Asia-dedicated sales and sales-support teams for private banks. BlackRock, Goldman Sachs Asset Management and JP Morgan Asset Management are three such firms.
It's about time, suggest some, as private bankers are often unimpressed with the service they are getting from fund houses.
“Manufacturers will come in and say, ‘Here are our 40 funds; please distribute them’,” said Roger Bacon, Asia-Pacific head of managed investments at Citi Private Bank. “But I don’t want their 40 funds; I want their top one or two. I want to do an assessment of those versus a peer group and cherry-pick.”
Kelvin Tan, head of investment funds at DBS Private Bank, made a similar point: “Don’t ask me to pick what I need; I want you to show what you can offer me.”
Most private banks don’t have many gaps in their suite of offerings, so they want to pick a differentiated product. They face the same problem as institutional clients, however: last year’s top-performing mutual funds may be this year’s dogs, and vice versa.
Whereas a retail bank may be happy to keep any given product on its shelf for many years, through good times and bad, private banks want something a bit special.
“What are the chances of that product catching the relationship manager’s eye and going into customers’ portfolio?” wondered Alexis Calla, Standard Chartered Private Bank’s head gatekeeper, based in Singapore. “If it doesn’t, then it’s a waste of everyone’s time. You need to make sure the product doesn’t just stay on the shelf.”
It’s not just retail product, but retail service that irks private banks’ fund selectors. “If we spend an hour meeting with their senior people, it is important to be clear on what the follow-up items are and who will take responsibility,” said a Hong Kong-based gatekeeper.
Of course, some buy-side salespeople understand this. One selector singled out Mark Serocold of fund house Neuberger Berman as doing a good job: “He recognises the need to find a few hooks where they are differentiated, and has passed the message up the chain and sent high-level guys from the US to see me.”
Another issue for selectors is the high turnover of fund salespeople in Asia, something that makes it harder to build strong, lasting relationships.
“I give this message very strongly to the CEOs of asset management firms in the region,” said Citi’s Bacon. “You’ve got to take this role seriously. You’ve got to have high-quality salespeople who are going to be here for a long period of time.”
Moreover, a local presence is now crucial. “The model that some have tried to adopt in the past of parachuting a salesperson in once every six months to do the rounds – that clearly doesn’t work,” said Bacon. “It just doesn’t provide the intensity and stability of relationship you need. The market here will not take you seriously if you try to do it remotely.”
However, a local presence may be less important – or indeed less preferable – when it comes to portfolio managers or product specialists. Chandrima Das, head of funds solution at Bank of Singapore, prefers to see specialists sitting with the investment team, be that in Hong Kong, London or New York.
Otherwise the chance of them losing touch with the fund management team is very high, she noted. In that sense, they would be “more like a salesperson with some extra content”, rather than a true product specialist.
Finally, brand counts – if not in terms of being a household name, then at least in having a recognisable, clear proposition, as, for example, Pimco does in fixed income. This is an area where multi-boutique managers have sometimes struggled, said private bank executives.
AsianInvestor is putting on a Fund Selector Forum in Hong Kong on November 12; please click here for more details.
* The full feature on this topic appeared in AsianInvestor’s inaugural Fund Selector Report, which has been sent to a selected list of recipients this month. For more details or to obtain a copy, please contact Rebekka Kristin at [email protected] or +852 2122 5203.