Goldman Sachs Asset Management has built investment teams in key Asian markets over the past few years. Confident of its track record in managing local equities, debt and alternative investments, the firm is expanding its business teams to support a more comprehensive business push.
"We are working through a process of refocusing our client- and product-end efforts," says Oliver Bolitho, Hong Kong-based head of GSAM in Asia. "The most important part of this is with regard to managing local products for local investors. In several markets, we now have the scale to be relevant."
Until recently, GSAM's efforts in the region centred on the sale of global investment products, primarily from the US, to Asian institutional investors. It now has track records of two to four years managing onshore strategies in Korea and India, as well as a longer history in Japan.
It is restructuring its organisation to sell this expertise to local third-party distributors and institutions. This requires boosting its efforts in sales, client servicing, product management and marketing.
Bolitho says the traditional activity of selling global products is stable and will continue. Asian institutions have an appetite for yield products, traditional fixed income and, lately, equities.
GSAM is also building an offering of alternative investments with the belief that regional institutional demand for these will grow. In particular, this means an emphasis on alternative products with relatively high levels of liquidity and transparency, with shorter lock-up periods in hedge funds, for example.
But the main effort is on supporting its local-market investment capabilities, says Bolitho. The firm is squarely taking on the big domestic incumbents -- the Nomuras, Samsungs and Reliances -- in these markets. This is to be achieved by consistently beating local benchmarks net of fees.
Bolitho acknowledges that taking on entrenched incumbents is not easy. "Our teams have asked the same questions about how to do this," he says. "Internally, we need to have confidence. We have experience of taking on incumbents in the US, and we're working through some ideas taken from there."
It is GSAM's intent to be seen as an obvious candidate for local investors looking to diversify new allocations away from incumbents, adds Bolitho.
In Japan, the institutional asset pie is no longer growing, and new allocations among institutions have gone to passive investments or other asset classes. There is also scepticism that Japanese equities can provide enough premium for investors.
GSAM hopes to boost market share by showing investors it can help them earn such a premium by marketing the performance of its Japanese equities team under David Townshend, or its equivalent (in credit strategies, for example).
Another strategy for the Japanese market is to adopt a measure of performance into fee structures, so that even long-only mandates require some level of net performance against benchmarks to justify getting paid.
In Korea, it is now three years since GSAM acquired Macquarie-IMM Asset Management. At the time of the acquisition, GSAM's ambition was to transform a local bond house into a provider of equity and other higher-margin products. Bolitho says, however, that Korean fixed income is now a sought-after exposure among institutions from Japan and elsewhere thanks to its relatively high yields. Kevin Cho runs the bond team.
The firm is also expanding its Korean equity team under portfolio manager Kevin Ohn, after a hiatus during the credit crunch.
Similarly, activity in India is gearing up again. GSAM obtained a licence two years ago, only to have to pause in the wake of the credit crisis. Bolitho cites three themes driving its ambitions there.
First is the regulators' focus on restructuring distribution away from a commission-led model to one that brings in new investors. Secondly, GSAM has built a track record in domestic equities under Prashant Khemka. Over time, the pension and insurance industries will be allowed to invest in equities, giving fund houses a chance to win that business. Thirdly, foreign competitors are starting to have success selling global products to Indian investors.
In China, GSAM has no direct role, but it is working with sibling company Gao Hua Securities, which has an asset-management licence to run collective-investment schemes and segregated accounts. GSAM is helping Gao Hua's asset-management team with risk-management systems and the building of both equity and bond teams. Further down the road, cooperation could extend to the qualified domestic institutional investor space.
But Gao Hua's asset-management activity is just getting off the ground. Run by chief executive Zhang Xing, the firm has a compliance officer, a business manager and a fixed-income portfolio manager on board. It is assembling the rest of the team and is expected to launch operations in the first half of the year.
Finally, GSAM has a licence to compete onshore for Malaysian institutional business. Bolitho says the firm is in the process of planning an office, putting in place client-support personnel and institutional sales people.
The firm is also putting together an Asian fixed-income team, the major missing piece of its regional investment capability.