HSBC Asset Management in Hong Kong has appointed Blair Pickerell as its new CEO. He replaces Paul Chow, who left last month to head the Hong Kong Stock Exchange. It is a significant move that has the potential to make HSBC's already dominant position in Asian fund management unassailable.
The hire itself happened very quickly. "I can hardly believe it myself," says Pickerell. "Paul went to the stock exchange and HSBC found itself with an opening on the asset management side, and asked me if I'd consider the position."
He says initially he wasn't interested, because he had recently founded his own company, Capital Holdings, after a distinguished career at JF Asset Management. But then his business, which is focused on China, languished because of travel restrictions due to the Sars virus. And that got him thinking.
"This represents the biggest job in asset management in Asia," Pickerell says of his new post. "HSBC has a fantastic brand and an incredible distribution network, not just in Hong Kong but regionally. It's the 800-pound gorilla." He was also impressed by its footprints in markets such as Taiwan and India, and its desire to get into China. HSBC Asset Management has $138 billion under management, part of the $306 billion managed by HSBC Group worldwide.
Pickerell is friends with David Eldon, chairman of the Hongkong and Shanghai Banking Corporation in Hong Kong, and observers believe it was Eldon who persuaded Pickerell to join. Pickerell will report both to Eldon as well as to Alain Dromer, global CEO of HSBC Asset Management in London.
Hong Kong's funds industry buzzed yesterday at the news and observers agreed that Pickerell looks like a promising fit. He has extensive experience with another large organization, JF, as well as a CV in the business to rival anyone's.
Twenty years of industry experience had culminated in his position as chairman of JF Funds and managing director of JF Asset Management. Pickerell, a fluent Mandarin speaker, had led the firm to become the first foreign player in Taiwan, where he helped innovate bank distribution of mutual funds, among other firsts. In 2001 he led a foreign wave of interest in setting up joint venture mutual fund companies in China, and JF's cooperation allowed Shanghai's Huaan Fund Management to launch China's first open-ended fund.
But following JF's acquisition by JPMorgan Chase, more conservative views in New York frowned on the terms of the venture, which was beginning to stall in any case because of disagreement with some of Huaan's shareholders. Amid an organizational reshuffle at JF Asset Management, Pickerell resigned in December; the next month he set up Capital Holdings with financing from Hong Kong private equity group UCL Asia, with the aim to establish a fund management JV in China.
"Cap Holdings was off to a great start," Pickerell says, who spent most of his time travelling in China, wheeling and dealing. But Sars has put that to a halt, and although life is returning to normal in Hong Kong, it may be months before the same can be said of China. Pickerell was looking at a long period of inactivity. Out of the blue, he says, came the call from HSBC.
[Capital Holdings will dissolve. Toby Brown, partner at UCL Asia, says, "It was a corporate name for Blair. We were interested in giving him a platform to see if there was something in Chinese fund management that we could identify and capitalize on. We were honoured to have a chance to back his foray into the entrepreneurial world."
[Brown adds that UCL Asia continues to seek ways to capitalize on the growing needs of Asia's middle class, be it via financial services or investments elsewhere.]
Pickerell will now have to grapple with a huge organization. "My priorities will be to get in, learn the business, meet the people and meet the clients," he says.
Observers believe he will find the business seaworthy. Before his departure, Paul Chow made a series of senior hires. On the investment management side, he poached a team led by Ayaz Ebrahim from the well-regarded Credit Agricole Asset Management (winner of several fund management awards from AsianInvestor magazine). On the business side, he put Eugene Chen from Barra in charge of regional business development and Sandra Lee - who had worked for Pickerell at JF - in charge of retail. King Au remains in charge of the institutional and private client business.
Says one market player, "Paul's left a structure ready for Blair to come in and just expand the business."
Although HSBC is a major player, dominating markets such as Hong Kong's Mandatory Provident Fund schemes, it does face several holes Pickerell will need to plug.
First, it needs to establish itself in China, where rivals such as JPMorgan Chase have a head start (it recently signed a JV with Sitico, one of Huaan's shareholders, to create a new fund company). Pickerell's experience will give HSBC a boost, although Sars will prevent any serious dealmaking for a while.
Second, HSBC has no presence in South Korea - a difficult but a large, dynamic market.
Third, it has something of an albatross in Taiwan, where in 2001 it bought China Securities Investment Trust for $103 million from Taiwan's China Industrial Development Bank. The expensive acquisition was meant to give HSBC quick access to a securities investment trust enterprise licence, but a few months later the licensing requirements were relaxed by regulators. Insiders say the firm has failed to integrate the Taiwan business, which has languished. Sorting this out will likely be a headache.
Fourth, while HSBC does dominate the MPF business in Hong Kong, it will face issues of improving investment performance and keeping its many customers happy. Most Hong Kongers resent the MPF in general; having the most customers simply means HSBC will have to deal with more disgruntlement, and rivals will continue to take shots at it.
Fifth, HSBC will need to make bank distribution of mutual funds more professional and efficient to compete more effectively against distribution leaders Citibank and Standard Chartered. Officially not Pickerell's remit, he will need to cooperate with the consumer banking group on this.
Sixth, Pickerell will have to continue the strong sales performance that HSBC has enjoyed thanks to its runaway success with guaranteed funds - a gravy train that won't last forever. That may mean changing the bank's culture to foster more of a long-term, financial planner kind of sales strategy - no easy feat.
Pickerell declined to comment on these issues, noting he has yet to get inside the business. Outside players believe, however, that he should prove an effective leader for such a large organization, and that he has a good team waiting. Competitors are likely to have plenty more reasons to fear the 800-pound gorilla.