Fund marketing supremo Stewart Aldcroft brings 16 years' experience to his new managing director post at Investec Asset Management. He outlines his game plan for the company's Asian operations.
Q: This is your third day with Investec. What's your first task on the job?
A: One of my first jobs will be to find some new space for this office. Investec has been growing quite well since it set up its business in Hong Kong about five years ago. We have 18 staff now and it's getting quite crowded. Where our business plan is concerned, I think the main objective now is to move the business from the current established position to a growth phase where we should be trying to enlarge our total business and increase our profile and our presence in the Hong Kong market.
Q: Investec is a South Africa-based company. Does your Hong Kong office play essentially a distributor role in the entire business structure?
A: No, it's everything. Hong Kong is our only office in Asia at the moment. And from this office we manage just under $1 billion of assets throughout the Asian region. We have services such as marketing and sales of funds, investment advice and management of funds, administration and accounting, a regional representative for Investec Bank, and a representative for private client fund management as well. So it's quite an all embracing role. Plenty to keep me busy.
Q: Investec built up its business a couple of years ago through the acquisition of Guinness Flight. Do you have similar plans to expand further?
A: Yes. Our plans are to grow the company through both business growth and acquisition. If we can find a suitable business or businesses to buy in the Asia Pacific region, then we will do so. We're very keen to do it and our organization has the money available to do it as well.
Q: How will your company take advantage of the Mandatory Provident Fund (MPF) market in Hong Kong?
A: We have no current MPF involvement, which probably is a good thing. I have had a lot to do with MPF in my previous employment [with Standard Chartered Bank and Templeton]. The best and biggest companies in the MPF market may yield a profit in five to seven years. For others, they may never make a profit. And some of them are already making very big losses. What is the point of being involved in the business if you cannot make money out of it?
Q: Will you try to get your funds distributed through MPF providers?
A: Not in the short term.
Q: Do you mean the MPF has not created any opportunities for Investec?
A: No. As a result of the MPF, there are now about three million people who will soon have direct access to mutual fund products through their MPF. The implication is that once they start to see what sort of investment return can be achieved through accumulation and saving, their attitude towards using investment products will change. And hopefully they will increase their investment in other specialist managed products.
Q: How will you take advantage of that opportunity?
A: One of the failings of most fund companies is that they don't focus on what their best opportunities are. Many are too broad, too diversified. I think there are more than 130 fund companies in the Hong Kong market. Many of them are what we call "spoilers" - they don't really look to get a lot of business but they spoil the opportunities of others to do this business as well.
As a business our role is to help independent investment advisers and banks to sell more products. We do all our business through third-party sources, such as independent advisers. Our third-party sources' responsibility is to tell investors whether Investec is good at any particular specialist funds. Standard Chartered Bank is the largest independent distributor of third party funds in Asia. I believe that in using the experience I gained at Standard Chartered and Templeton, we will be well-placed to work with different banks to help them train their own people, allowing their staff to then educate their customers about what to look for when making investing decisions.
Q: What do you mean by independent advisers? Are they advisers with independent financial planning houses who do not take commissions and charge fees for services provided?
A: On our mailing list there are more than 1000 independent advisers throughout the Asia-Pacific region. A large number of these advisers are outside of Hong Kong and they sell insurance products often issued by Royal Sun & Alliance, Royal Skandia, Eagle Star, Hansard and Scottish Provident. Many of these products are used as part of a tax planning exercise. Investec has funds available through these insurance companies. They earn commission as a result of making sales based on the advice given.