Swiss private bank Lombard Odier will not acquire wealth businesses in Asia despite ongoing industry consolidation, preferring to establish local partnerships to gain access to onshore clients.
Vincent Duhamel, head of Asia, said: “We are not good acquirers. This is a people business and to manage culture is difficult. I have rarely seen an acquisition in asset management or private banking that was successful.”
Duhamel noted that M&A always created tension and that often the best talent ended up leaving the newly merged entity.
There are exceptions of course. Take Singapore-based OCBC's 2010 purchase of ING Private Bank to create Bank of Singapore, which has more than doubled its assets under management from $23 billion to $51 billion (as of end-2014) since the deal.
And prospects seemingly abound in China for M&A with onshore wealth management firms, which provide local firms with access to offshore investment capabilities and allow foreigners to tap the onshore market. That was why Swiss bank Julius Baer acquired a minority stake in Chinese wealth manager Jupai Holdings.
However, Kenny Lam, president of Chinese wealth manager Noah Holdings, suggested that such deals -- at least when it came to foreign firms buying Chinese ones -- were more advantageous for the acquirer than the acquiree. And Shanghai-based Z-Ben Advisors expects to see a trend towards partnerships rather than M&A in the wealth sector, as reported.
Lombard Odier has shown it prefers the partnership route through tie-ups including recently with Thailand’s Kasikornbank in December 2014 and Australian wealth manager JBWere in March 2012.
The Swiss bank's other partnerships in Asia include those with seven regional banks in Japan, Korea’s Kookmin Bank and China’s Industrial Bank, with which it worked in November to structure a hedge fund strategy for mainland high-net-worth clients.
Moreover, Lombard Odier has more tie-ups in place than it has made public, as some of the deals incorporate non-disclosure agreements.
Vincent Magnenat, head of private banking for Asia and lead for partnerships, said it continued to look for opportunities for tie-ups and was open to various models. He said that expansion in the region would be through organic growth and partnerships providing onshore access, which would otherwise be difficult, given tighter regulations in private banking now.
Magnenat declined to comment further on where or with which firms it would like to have partnerships.
Magnenat is looking to add senior bankers to Lombard Odier's team of 30 relationship managers in the region. He is looking for individuals suited to the firm's core focus on discretionary portfolio management, which accounts for about 60% of its business in Asia ex-Japan and 100% of that in Japan. For most private banks in Asia, DPM tends to account for only about 10% of total AUM, though it is seen as a growth area.
Lombard Odier’s total client assets stand at $223 billion, with $120 billion accounted for by private wealth clients and $50 billion by asset management clients. The remaining $53 billion is accounted for by technology services clients. The firm manages around $8 billion for Asia clients (in Asia). The stated minimum level of investable assets per client is $5 million, but this isn’t religiously followed.