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With $180 billion of global assets under management, Russell Investments offers outsourcing solutions, which range from strategic advice to full outsourcing. While its biggest markets are the US, Europe and Australia, Asia represents strong growth opportunities. The company set up its Asian operations in 1986 when it opened an office in Tokyo. It now has institutional clients and retail partners in markets across the region, including Thailand, Korea, Taiwan, Hong Kong, Malaysia, Singapore and China.
Pflaum shares his views on multi-manager investments with AsianInvestor.
What opportunities does Asia offer, in the context of the current economic crisis?
Pflaum: We see more opportunities in the region as Asian institutional investors start to realise the benefits of outsourcing the day-to-day operations of portfolio management. This has in turn helped to boost interest in multi-manager platforms.
What sorts of clients do you target in Asia?
We target institutional investors that are looking to outsource activities such as manager selection, monitoring and reporting. Clients in Asia include large government pension funds and international financial and corporate clients on their book, the likes of Barclays Bank, BHP Billiton, Alcoa and Caterpillar.
Asia tends to be dominated by onshore portfolios. It is only when investors start to go global and move money offshore that our solutions become more attractive. This is happening but Asia is still going to be a small player for us over the next few years, until investors here start to go more global and gain more maturity. As a result, we continue to grow and develop our Asia business.
What has been the take-up of multi-manager products in Asia so far?
The overall take up of multi-manager products in Asia has been slow. This is partly because these markets are at an early stage of development. We believe the biggest markets will initially be Korea and Taiwan while the biggest user of multi-manager particularly for offshore will ultimately be China. Enterprise annuities in China are the main target market as they continue to develop their retirement systems.
We are also targeting markets across the region including Hong Kong, Singapore, Thailand, Malaysia, where investors are placing more money offshore and making strides in terms of fiduciary best practice.
Where do you run your back and middle operations?
We concentrate our back and middle office operations in three global centres: Sydney, Dublin and the US. Clients in Asia have access to funds in either Dublin or Sydney depending on which time zone and which funds they choose. Trying to run global portfolios from 20 different locations around the world has an impact on efficiencies. Operations need to be centred in a few locations: in the US for regulatory reasons and to sell products into that market; Asia and Europe to cover the different time zones.
What services do you offer as part of your multi-manager portfolio?
We look after all activities related to contracting, setting up accounts with custodians, monitoring the managers and checking for compliance on all the mandates. The custody and fund accounting functions however are outsourced to specialists. Transfer agency and audit roles are also outsourced, in order to achieve efficiencies and economies of scale.
When it comes to execution of trades in the market place, we believe the agency model is the best solution and in the clientÆs best interest; so we are not tied to a particular broker or execution venue. We have access to every tradable venue globally and we run a 24-hour trading desk in the US. Hence we are agnostic in terms of how we run trade for our clients. We are looking for the best price and the best execution for the size of the trade.
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