Last night AsianInvestor held its celebration dinner for its 12th annual Investment Performance Awards. Today we’d like to explain our thinking behind a few of the marquee awards, which we believe serve as a reflection of the key industry trends last year. (All the winners have a write-up in the June edition of the magazine.)
The big six awards went to China Universal Asset Management, Nikko Asset Management, BNP Paribas Investment Partners, CIMB-Principal Asset Management, Pimco and JP Morgan Asset Management.
These awards were a judgment call by our journalists. We sought to look beyond the confines of asset classes or country expertise, in order to understand the bigger trends driving the industry. The global financial crisis has changed this business and we wanted to be sure our awards reflected that.
China Universal Asset Management (Best Business Development)
Cash management funds are not typically seen as sexy or innovative, but launching a range of them in China last year was a timely and groundbreaking move, effectively creating a new product category. China Universal Asset Management showed a great feel for what the mainland market wanted with the introduction of its 30-day Cash Management Fund. It set a record for a fixed income IPO by raising RMB24.44 billion ($4 billion) in six days (May 2 to 7). It was also China’s first cash management product, featuring components not seen before in the domestic market, including an automatic rollover feature and daily subscription to a fund of fixed investment term. The firm then capitalised on that demand by launching three more tranches of cash management funds (14-day, 28-day and 60-day), raising a further Rmb29.55 billion within five months of the first IPO. China Universal has thereby set a trend and created a set of rules and features for this product category in its domestic market. Ten other firms have since launched 13 funds between them along similar lines. This helped contribute to a growth in commingled fund AUM during 2012 of 24.5% to Rmb66.95 billion ($10.65 billion), from Rmb53.78 billion as of the end of 2011. That’s impressive, given that that the bulk of the increase has presumably come from client flows rather than stock market appreciation. In terms of segregated accounts, China Universal is one of the few domestic managers to run money for country’s National Social Security Fund, and counts among its clients most of the biggest mainland insurers. It won several substantial new institutional mandates last year. Meanwhile, the manager launched its first alternative investment product in July 2012, a discretionary commodity futures portfolio, under a joint-effort with CES Futures.
Nikko Asset Management (Retail Product of the Year)
Launched just days before the end of last year – therefore scraping into our 2012 timeline – the Nikko Gravity Americas Fund is an example of a trend-setting product from a brave and intuitive market call. Bullish on the outlook for the US economy on the understanding that the shale energy revolution can improve the US current account deficit, Nikko AM took a chance that Japanese retail investors would buy into the story. Pure international equity product in Japan tends to focus on emerging economies, with very few targeting the US or Europe. But it proved an inspired choice, raising $2.3 billion during its initial launch period last December – the third largest fund launch of any kind in Japan. Of course, having one of the country’s leading distributors, SMBC Nikko Securities, onboard was a major plus. But this product broke new ground, and as a consequence a number of copycat funds have since been launched. Although very early to give performance data, up to the end of March this year the fund was up 12%.
BNP Paribas Investment Partners (Institutional Product/Strategy of the Year)
Insurers have struggled to match assets to liabilities in the past few years, having written policies and issued guaranteed products back when interest rates were significantly higher. Since the 2008 crisis, interest rates have dropped heavily and market volatility has risen markedly – leading to insurers seeking ways to tackle the issue. This led to BNP Paribas Investment Partners last year winning a mandate to help one of the biggest Asian insurance firms develop an in-house liability-driven investment (LDI) programme, with its tailored LDI partnership. The client intends to diversify away from long-only portfolios into more risky assets to boost investment returns. Hence it needs a very clear understanding of the valuation and future dynamics of its liabilities, for which it sought a fully customised solution. It decided a partnership approach with an international asset manager would be needed for what is the first time it has embarked on such a programme. The insurer carried out in-depth planning and then conducted a due-diligence process on four firms over several months before settling on BNPP IP. The French firm uses cashflow-matching methodology and sophisticated liability analysis – a more advanced approach than the other fund houses. BNPP IP has struck similar partnerships elsewhere, but none on this scale in Asia. And it is a truly Asian deal in the sense that it is designed and implemented in the region, albeit using global technology. The client, which expects to finalise the programme this year, says it is very satisfied with the service and “very proactive” and consultative implementation process. It has backed this up by awarding an investment mandate to BNPP IP, and others are under discussion.
CIMB-Principal Asset Management (Asian Fund House of the Year)
This is a joint-venture firm with clear regional ambitions, and 2012 was the year it began to make real progress. In the Association of Southeast Asian Nations (Asean), it saw funds under management increase significantly across Singapore (+84%), Thailand (+42%), Malaysia (+34%) and Indonesia (+24%) – and that in a challenging year for asset managers. Overall its AUM rose 36% to $11.9 billion, of which around 60% is institutional and 40% retail. It won 43 new mandates and secured unit trust accounts with 37 new clients last year, including one from a Gulf Cooperation Council nation with the creation of two feeder funds for Middle East distribution, as well as a client in Japan, where it became one of only two Malaysian fund firms to manage a global bond mandate. It has been ramping up its operations aggressively; in Thailand its equity funds all achieved top-quartile performance in 2012, with its open-ended flagship iSeries funds generating $30 million in sales, while in Indonesia its dollar bond fund achieved plaudits with a 9.47% performance for 2012. Also, it launched the CIMB S&P Ethical Asia Pacific Dividend ETF last year, a first of its kind off the back of its successful Asia Pacific income strategy from 2011. Plus in Malaysia CIMB-Principal became one of eight fund providers selected to offer a private retirement scheme, which it is now striving to introduce systematically to employers. Aside from Asean, CIMB-Principal also has North Asia ambitions and is setting out to establish itself in Taiwan and Korea and grow in Japan. Add in its shariah investment capabilities, where it won more than $1.2 billion in institutional mandates, and you can see a fund house on the rise in the region following a routine rotation of its top management earlier this year.
Pimco (Institutional Solutions Provider of the Year)
It’s fitting that one of the best-known fixed income specialists has won this prize after a year that belonged to debt investments. But Pimco deserves this accolade for far more than simply being the right manager at the right time. The US house has long been a go-to provider for many institutions in the region, and that was as true as ever in 2012, with clients highlighting its consistently strong performance and high-quality, professional service. Some cited Pimco’s ability to provide a comprehensive picture of overall allocation better than its rivals. That helped its case in a year when institutions focused increasingly on using multi-asset allocation to mitigate risk and achieve more stable returns. The firm has also been at the forefront of creating alternatively weighted bond strategies in what is a rising trend; indeed, it has helped clients convert entire debt portfolios to newly weighted benchmarks. Moreover, it has made impressive advances in the alternatives space in the past few years, and particularly in 2012, say clients, putting together a team and a number of new products in this area. As a result, customers say Pimco has helped them better understand their exposure to real assets, and that it has also boosted its capabilities in hedge funds and private equity. Pimco is often thought of as a core bond manager, but its biggest flows last year were into emerging market, local Asia and investment-grade corporate strategies, as asset owners were forced down the credit spectrum in search of yield. The upshot: in a difficult year, Pimco’s total Asia-Pacific-sourced assets under management grew an impressive 21%, including net new inflows of $27.2 billion, taking regional AUM to $194 billion. Some $58 billion of these are Asia ex-Japan assets, which grew 34% with $11.9 billion of new inflows.
JP Morgan Asset Management (Asset Manager of the Year)
In a year when yield and dynamic allocation were called for, JP Morgan’s investment performance and flows were strong and diversified. Its Asia business now manages $122 billion for retail and institutional clients, having grown 12% last year driven by its retail business. It gained market share, especially in Taiwan and Hong Kong, where it captured almost 50% of flows into multi-asset strategies. Its restructured Asia Pacific Income Fund has attracted $4.2 billion, almost all from Asian clients, returning 22% net of fees to this March with 5-6% yield. In China its JV launched five A-share funds in the face of a downturn to take its total to 18, with plans to launch RQFII product this year. In India it saw its assets almost triple in 12 months, with its Asean offshore equity fund seeing inflows and launching three- and five-year fixed income lock-in products. In Singapore it has signed with new distributors, so watch out for flows there. On the institutional side it added a handful of new clients, with 240 strategies on its platform. Clients gave the firm plaudits for its sales service, particularly in alternatives, such as its private equity offering. Its capabilities for insurance firms were singled out. It has also been seeking ways to bring distressed debt opportunities in Europe to Asian clients that regulations often prevent from holding loans. Further, having won praise – and our institutional product award last year – for its AIRRO sidecar offering, JP Morgan AM has seen continued success for its core AIRRO strategy, which invests in Indian infrastructure. It closed AIRRO 2 this year at $250 million, with all clients subscribing again. AsianInvestor is judging the same pool of finalists for this award, the class that has responded best to the shock of 2008. After retaining this title, it is incumbent on rivals now to prevent JP Morgan Asset Management from winning a hat-trick of titles next year.