In his own words, Blair Pickerell presented on “a live grenade of a topic” at this year's Fund Forum Asia conference in Hong Kong: Whether the western asset management model works in Asia.
In the end, Pickerell, Nikko Asset Management's head of Asia and global head of marketing in Hong Kong, concluded that it does, as long as it's implemented in the right way.
Even for an American who’s been in the region for 30-odd years, who knows the Asian funds industry inside-out and who speaks Mandarin, this is a delicate area to explore.
Pickerell kicked off by noting that “there’s evidence that a western model works here”, in terms of having investment teams supported by operations staff and external service providers such as fund administrators, custodians and headhunters.
The client base is also broadly similar, he adds – including sovereign wealth funds, insurers, pension funds and private banks – as are the methods of distribution.
“So it’s pretty easy to conclude that there’s very little substantive difference between the industries in the east and the west,” he says. And the fact that the leading asset managers – the likes of Fidelity, JP Morgan and Schroders – are all foreign-owned seems to reinforce this.
Where the problem lies is not in the model itself, says Pickerell, but in western fund management firms themselves. He sets out the areas where he feels some companies fall down in developing their business in Asia.
For one, they often believe Asian clients should behave just like Americans or Europeans and will therefore want to buy the same funds. But, he points out, a US municipal bond fund or Hungarian equities vehicle is simply not going to have the same appeal to an Asian investor as it might closer to its home region.
“[Western asset managers] often tend to offer a small number of their best-performing funds, and if clients want something spicy, they may suggest an emerging-market fund, but never a single-country fund,” says Pickerell. “They’d consider that too risky.”
Asians do have a propensity to trade funds and be less retirement-focused in their investments than Europeans or Americans, but that’s a fact of life, he says.
Another issue is that western firms often have ‘siloed management systems’ where decisions are all made in London or New York, whether they are on, say, the vetting of funds or the look and feel of advertising or marketing.
“When all these silo reporting requirements are added together, fund managers here end up stuck at the speed of a fast-moving glacier,” says Pickerell. “I can’t tell you how demotivating this is to country heads and regional management out here.”
He also notes some western firms’ level of commitment – or lack of it – to Asia. Not only do too many put a small number of people in the region, but in crises they tend to lay people off there first.
“How many of you have wanted to say to your head office in the UK or US: ‘When Asia has been booming and we've been highly profitable, do we have to cut deeply into staffing levels, because you’ve got problems there?’”
Pickerell goes on to say that Nikko AM follows a western model, in the sense that most of its functional department heads are westerners, who follow international best practice on corporate governance, risk management and so on.
However, the team mentioned has a lot of on-the-ground experience in Asia, he adds, and holds certain core views that set it apart from other firms. Those views are: independent firms work better than those owned by banks or insurers, due to the culture differences; companies with HQs in Asia will have a much better understanding of the region than global firms; Asian countries differ hugely from one to another, so it’s no good trying to sell similar funds or take the same approach across the whole region; and hiring the best local management you can find and letting them get on with it is the best approach.
“If a manager is senior enough to deal with sovereign wealth funds and central banks, he is senior enough to decide which building to set up in,” says Pickerell.
The large number of Asia-based funds-industry executives at the conference who echoed his sentiments show that such frustrations run high in the region.
Pickerell's feel for the region is not surprising. He joined Tokyo-based Nikko AM a little over six months ago, having run Morgan Stanley Investment Management in Asia since 2007 and before that HSBC Global Asset Management. He was with JF Asset Management in the region for a long stint prior to that.
Nikko has been busy building its regional business, with the purchase in recent months of an Australian firm – Tyndall Investments – and Singapore's DBS Asset Management.