I have been inundated with emails over the past few weeks asking for my advice. Ever since we published my wtf@asianinvestor.net address (people have been calling it Alpha-Mail) the servers have been running round the clock and the questions flowing in.
I have tried to respond personally to all of them but regret this is impossible – if you really want to catch my attention for a tailored reply, keep it short, to the point, and maybe include a picture.
At least that would take my mind off the humiliation of having my game-changing Alchemy ETF rejected by Integrity’s US headquarters. Once again, I am moving too fast for my colleagues to keep up.
Many of these inquiring missives have come directly from the desks of CEOs of big US and European players, keen to know how best to set up shop in Asia. Clearly I am flattered to receive correspondence from such illustrious businesspeople, but at the same time, I commend their good choice in approaching yours truly for help.
I guess that, for many of them, I am an ideal Asian CEO-in-waiting and so making that early contact is a clever strategic move.
Now, for these Johnny-come-latelies, the business acquisition options are several, but there is a lot of competition out there.
In fact, this might even be the last serious wave of new entrants to the Asian asset management scene: if you ain’t in by end-’11, the door is gonna be closed, folks.
The war for sales talent in this part of the world is stepping up and is really suffering from weak supply. For new entrants, it will be vital to align themselves with a deeply established sales head, who knows the territory and how business is done here. There aren’t so many of us around.
There are a few options open for consideration, with varying costs, speeds, success rates and attractiveness. As someone who has been operating in the region for nearly 2.6 years now, I can definitively outline these choices for you:
Direct acquisition of a smaller local player
Very tough gig, seldom done successfully. Those guys you’re buying it from, they are selling for a reason, most often because they want to retire early and move to Phuket. Within two years, you’ll have had to replace everyone on the team and 50% of the assets will have walked. And you’ll have paid 3% of AUM for the privilege. Think landmine, not goldmine.
JV/tie-up with local player
You probably can’t afford to buy any of the established distribution networks, so why not simply team up with one? The answer is simple: because you will never, ever, be in control. Even if you buy 49.999% of the business, you’ll still be sitting with a pair of twos when your ‘friends’ have royal flushes. Remember, a JV is a great place for local kingpins to get rid of 49.999% of their overheads! Sure, you might sell some funds in the process, but history is littered with failed joint-ventures. Chances are yours will be no different.
Lift-out of an existing team
Most often this is done with investment teams rather than sales units, so it is far less interesting for us traditional hunter-gatherer types. Indeed, this is normally seen as a last resort, used as a kind of holding pattern until the right sales people can be afforded. Don’t fall into this trap: Asian investment managers are a dime-a-dozen and nobody can tell the difference between them anyway. Save your pennies for the rainmakers – they’re where it’s at.
Do it remotely, fly-in from HQ
…and be the laughing stock of an entire region.
Grow organically, seconding people from HQ
This will take time, and the people you send from London or New York will be starting from Square One, well behind the rest of us who already have the inside track on who to speak to, how to establish contacts, where to go for lunch, where to stay in KL, and so on. This type of insight cannot be grown overnight. It can, however, be bought…
Make key strategic hires to build your business for you
This, from experience, is the best route at the moment. You’ve missed the first few boats to sail to these shores, so rather than starting so far behind, go grab yourself some locally experienced but globally aware talent, and incentivise them properly to make it happen. Get it right, and expect to tap the untold wealth of the Asian nations. Get it wrong and you’ll wake up in five years' time and be even further behind the big boys.
You’ve also got the whole Singapore versus Hong Kong debate to deal with, although it’s common for the C-suite to shrug and let the chosen personnel decide – it makes them feel empowered, when in fact it doesn’t matter one little bit.
So good luck with your Asian expansions, fellas. No doubt each of you will find your way down at least one of the above paths. Just remember my advice – when you’re so late to the party, it always helps to have the prom queen on your arm. I think you know what I mean, and I look forward to continuing our discussions soon.
(William T. Fitzgerald is available to answer queries regarding the industry, your career and your clients. Requests for advice that mention Will’s successes and accomplishments will receive priority in the queue. You can e-mail him at wtf@asianinvestor.net.)
William T. Fitzgerald is a fictional character, as are all the other individuals and companies in “RFP Diary”. Any resemblance to the living or to real firms is purely coincidental. Will’s adventures continue fortnightly.
