Morgan Stanley Investment Management is seeing traction from Chinese insurers both as distribution partners and institutional clients and, like other fund houses, is seeking to expand its intermediary business across Asia.
While a key focus of development on the distribution side is global key accounts, business growth is also being driven by local partners, including Chinese and Hong Kong insurance companies, said Paul Price, MSIM's global head of distribution.
“Chinese insurers are a good example. We engaged in a dialogue with them a number of years ago,” he told AsianInvestor during a recent trip to the region. “We are working with a number of insurance partners, adding funds to a range of platforms and holding educational sessions on MSIM products with platform advisors.”
The firm has also broadened its intermediary business’s footprint in Hong Kong, Southeast Asia and Taiwan, and is eyeing Indonesia and the Philippines. It is aiming to expand its sales teams on the ground. “The magic dust is finding great people who are locally aware. In most instances we want them based locally,” said Price.
He declined to reveal how many distribution partners it has onboarded in recent months or how many staff it wants to add.
Intermediary business expansion has been something of an industry theme of late in Asia, particularly on the retail side. Among the fund houses building out on this front are Axa Investment Managers, JP Morgan Asset Management and Neuberger Berman, to name just a few.
And State Street Global Advisors last month appointed James MacNevin to the newly created role of head of intermediary business for Asia Pacific, following a similar move earlier this year by JP Morgan AM.
Meanwhile, MSIM is starting to export its Asian strategies out of the region, such as the firm’s Indian equity fund. “A number of sovereign wealth funds have shown great interest in these country-specific mandates,” said Price.
“For example, we have our listed real estate team in Singapore. We’re beginning to see a lot of interest in its product, not only in the global listed real estate strategies, but on a stand-alone basis,” he noted. “We are making these [products] available to US investors.”
He cited MSIM’s Emerging Leaders strategy, managed by Singapore-based portfolio manager Ashutosh Sinha, as one that has been attracting groing interest from its global clients, particularly in parts of Southern Europe. Since its launch in July 2011, the strategy’s AUM has grown to $272 million.
Moreover, Asian equity mandates that have been offered outside the region have performed strongly, said Price. The firm’s Asia-Pacific ex Japan and China A Equity strategies have generated more than 2% alpha this year to the end of May, while its Emerging Market Leaders Commingled Composite strategy has generated 7.91% annualised alpha since launch in June 30, 2011 (gross of fees).
As for MSIM’s institutional business in Asia, Chinese insurers are, again, a major focus, given their widening scope of overseas investments. “You’ve recently got a number of RFP processes that have begun with different parties. This is really just the beginning,” said Price. He declined to say whether the firm has won any mandates as yet.
“Chinese insurers have been looking at alternative products,” he added. “But our greatest excitement surrounds asset allocation products and some specific mandates, like US equity mandates. Over the next few years, I think asset allocation products will become mainstream; they will most certainly dominate the scene for the foreseeable future.”
Other fund houses, such as Barings and Schroders, also anticipate continued flows into multi-asset strategies.
The mainland could see $158 billion in insurance mandates awarded to foreign asset managers by 2018, said Shanghai-based Z-Ben Advisors in a report released last month.
“The first few billion have already begun to trickle out, with several insurers issuing the first-ever RFPs for offshore investment in 1H14,” said the consultancy. “This wave of RFPs coincides with an unprecedented decline in deposits over the course of 2013 as insurers re-evaluated their underperforming portfolio allocations.”
Z-Ben forecast that by 2018 Chinese insurers’ assets will surpass $2.25 trillion, of which $300 billion could be invested offshore. Some 30% of these firms’ assets are parked in unproductive deposits and could be moved to higher-return investments, including offshore products, added the report. Foreign asset managers will play a key role in helping mainland insurers diversify their portfolios, it said.