AMP Limited's incoming CEO Craig Meller is setting out an aggressive growth strategy for its investment management arm, AMP Capital, to counter a shrinking AUM in Asia.
AMP Capital, which manages A$131 billion ($120 billion), has seen its AUM sink more than 10% in the six months to June 30, which the firm says is chiefly due to Japanese retail investors pulling A$1.4 billion due to onshore opportunities sparked by ‘Abenomics’.
Asian investors (including the Middle East) represent just 6% of AMP Capital's overall AUM, while Australia and New Zealand account for 82% and 11%, respectively.
Meller's growth plans specifically revolve around providing easier access for AMP’s Australian and Chinese investors into each others’ markets, and furthering its joint venture with China Life.
“Our China strategy is three-fold,” Meller tells AsianInvestor. “Firstly, taking Australian clients and investing into China through [programmes] such as QFII [qualified foreign institutional investor] quotas; working with Chinese partners and clients to invest in other markets such as Australia and our European infrastructure business; and also through our memorandum of understanding [MoU] with China Life, potentially looking for opportunities to work together in pensions and asset management as a domestic business in China.”
Meller, who has been managing director of its financial services arm since October 2007, is due to assume his new role as group CEO on January 1. In addition to continuing oversight of AMP Financial Services, he will head up its investment arm and the recent start-up of the firm’s self-managed superfunds subsidiary, AMP SMSF.
Meller replaces Craig Dunn, who will retire from AMP following six years as chief executive, and managing director for 13 years.
The firm’s JV with China Life, which marks the first time a foreign fund house has joined forces with a Chinese insurer, is expected to be completed by the end of the year and will likely offer new means of distribution for the Aussiw fund house in China. Meller declined to comment on the MoU.
Regarding QFII, AMP Capital has so far received three batches of quota totalling $500 million. It is managing the third batch of $200 million quota for a Hong Kong subsidiary of a large international bank, which Meller declined to name.
It used the other QFII quotas to launch a listed Chinese equities fund in Australia, with a number of AMP’s underlying life insurance funds invested into the QFII product.
Meanwhile, AMP Capital has had success in reaching out to Chinese investors, having secured a mandate by China’s National Council for Social Security Fund last year to manage real estate assets. The firm has also been active in building its Asian business, using Hong Kong as a hub.
After hiring a trio from BNP Paribas Investment Partners a year ago and relocating some staff from Sydney to Hong Kong to set up an equities desk, the firm recently announced plans to start fixed income operations in Hong Kong.
It also has plans to build out a quant fund strategy out of Hong Kong to be headed by Mark McClatchey, Meller says.
These plans come after AMP Capital’s total Asian AUM, including the Middle East, have declined to A$7.4 billion ($6.8 billion), from A$8.4 billion from December 31 through to the end of June.
According to its most recent investor report, the drop in AUM is largely due to an exodus from Japanese retail clients, who pulled A$1.4 billion out of AMP Capital as the yen depreciated on the back of Japanese prime minister Shinzo Abe’s economic reform agenda.
“A lot of our Japanese clients who were investing offshore have been taking in profits with a falling yen,” says Meller. “That has been a change for us and that is more short-term. But we still think that Japan will be a net exporter of capital for a long period of time.”
He says the firm is not losing faith in the Japanese investment community - AMP Capital has plans to launch global Reit and infrastructure debt funds in the second half of 2013, which will be distributed to pension clients of Japanese firm Mitsubishi UFJ Trust and Banking Corporation, which has a strategic alliance with AMP Capital.