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Dev has over 14 years of experience managing key relationships with some of the marquee institutional clients in the South Asian region and in product development. Most recently, he served as vice-president for institutional sales at Lehman Brothers Investment Management where he was responsible for spearheading the firmÆs regional marketing and sales initiative.
Before that, he was with Societe Generale Asset Management (SGAM) where he was involved in institutional and retail distribution. At SGAM, he was instrumental in successfully launching Societe GeneraleÆs first Islamic product for regional distribution. He started his asset management career with Franklin Templeton Asset Management in Hong Kong in 1995 and was the member of the core team to set-up their Singapore business in 1996.
Principal Global Investors is a diversified asset management organisation and a member of the Principal Financial Group. It manages around $228 billion in assets primarily for retirement plans and other institutional clients. Its investment capabilities encompass an extensive range of equity, fixed-income and real estate investments as well as specialised overlay and advisory services.
Dev spoke to AsianInvestor about the trends and challenges in the institutional investors market in Asia.
How do you expect to perform your job within this environment? What are the challenges?
Dev: There are a huge number of challenges, no ifs and buts about it. The only solace I would have, if at all, under this current market condition is that the institutional clients who I work with û sovereign wealth funds, central banks, and pension funds û have mandates to deploy irrespective of market condition. They invariably need to have asset allocation as well as investments because thatÆs what mandates prescribe. They will always have a requirement wherein investments have to be made.
What are the opportunities available to you?
Opportunities arise in two ways. One, obviously they will be more cautious this year in dispersing new assets given that some part of the reserves may be benchmarked for some unforeseen bailouts that they may be required to do, as we have seen in the US. The second is there is a very strong chance of a revaluation of fund managers taking place. Obviously, they will look at performance and fees more closely and that could provide an opportunity. Relationships play a key role over here and you have to be at the door and hopefully the choice gets made when you are already there.
Having said that, itÆs not going to be easy, thatÆs for sure. This year is going to be extremely challenging.
What do you think institutional investors will be looking for when they assess fund managers in terms of performance and fees?
First of all, the Asian institutional clients û particularly Southeast Asian clients û are extremely price sensitive. I guess thatÆs going to play a further key role in terms of finding the kind of fund managers they would like to work with. I believe there is also a slight inclination among some of the institutional investors to look at asset classes beyond the traditional asset classes. Because of what has happened over the past three to four years with the boom in the equity markets, some of the big players were actually looking to go beyond the traditional fixed-income space, which is what most of the central banks here do. At that the time, markets were doing so well and there was pressure to participate.
I think what has happened over the past two to three months is probably not going to happen again in the near future, which means that they remain focused on their traditional investments. So a fund house that has an inherent strength and does not offer too many exotics or alternatives or other new asset classes, would today realign to see if there is further interest in doing this.
Institutional investors are a different breed. Most of them are bureaucrats and these bureaucrats are primarily dealing with requirements that have been mandated to them by the investment guidelines set forward by the institutions. They are very rigid and canÆt stick their necks out because they have to follow the rules.
Do you think there will be a move among fund managers to try and undercut each other in terms of performance fees?
It would be challenging to lower the fees. I donÆt expect a huge fight among fund managers. The fees are one aspect but fund performance is equally important. You are not going to get a client to come to you just because you are charging lower fees, if your products are not up to the mark. The opportunity is going to come in terms of deployment.
What are the specific opportunities in terms of assets classes that could attract institutional investors?
We are looking at Islamic funds. ThatÆs another platform that we managed to get in play over the last couple of months. That probably will give us a little bit of a lifeline in order to grow our business because then you will have a diversified asset class to go into. Primarily, the client segment has a reasonable amount of funding available for sharia assets. That is another window of opportunity that we are targeting.
Are you able to offer the whole gamut of asset classes to your clients in Asia?
Could you elaborate on your institutional business in Asia?
The institutional business is primarily divided into two parts, North Asia and Southeast Asia. The markets werenÆt segmented to such an extent because my predecessor [Susie Chong] had some exposure to North Asian markets, so there was an overlap. But now we have really divided the markets. I am responsible for the Southeast Asian markets of Singapore, Malaysia, Brunei, Indonesia, Thailand, India and the Philippines.
The demand from clients from North Asia and Southeast Asian tends to be different. For example, the Islamic platform for is technically non-existent in the North Asian context. You are not going to find many institutional investors looking for Islamic products in China, Hong Kong, Taiwan, and Korea, but we do get that demand from Brunei, Indonesia, Malaysia and Singapore.
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