Asia Pacific's family offices are a nimble bunch and never more so than when it comes to ESG where they're already proving to be ahead of the regulators.
The firm is one of the largest asset management companies in Singapore, with total assets under management of more than S$30 billion in that office and a staff of more than 150. Singapore is the regional hub for SchrodersÆ business in the Asia-Pacific region, headed by CEO Lester Gray. The Singapore office is led by country head Susan Soh who is responsible for the strategic growth of the firm. Soh spoke to AsianInvestor about the firmÆs operations in Singapore and the rest of Southeast Asia.
What markets is the Singapore office responsible for?
Let me give you a background on the business channels we have here. In terms of distribution, we are selling our products in the retail market through bank distributors, the private banking and institutional channel, and we have also started a focused strategy on the insurance channel.
In terms of our retail market coverage, it is primarily in Singapore and Malaysia. We are currently covering private banks in Singapore. Another team is covering private banking in Hong Kong. With private wealth in the region growing, we are potentially looking at private banks in the rest of Southeast Asia from Singapore.
In terms of the focused strategy, we started it just this year. We are looking at the insurance business in the entire region from here but of course while working with colleagues in other countries where we have offices because they are the ones with local knowledge. In terms of institutions, we are covering Southeast Asia from here.
What is the extent of your retail operations in Singapore and Malaysia?
Singapore, like Hong Kong, is quite a mature retail market. In terms of how we take our strategy forward, it is a market where we have to continue to innovate with our products to retain our market share. Currently, we rank second in the Singapore unit trust industry in terms of assets. The unique position that Schroders has is our ability to offer both the traditional investment products and the structured investment products. This is particularly useful with the volatility of the market, where investors are concerned about global economic slowdown and risk appetite subsiding. I think there will be increasing demand for outcome-oriented products.
How aggressively are you coming up with innovative products?
The competition here is already very keen. When we are a first mover in a product, very soon after we will see that our competition will keenly follow suit with a quite similar product. Our strength is in our ability to combine our traditional asset management product with our structuring capabilities. Traditional products are essentially actively managed products, but the outcome is very much dependent on the markets. With the ability to do structuring to overlay those products, we can provide investors with more certainty of outcome.
What are the main challenges you are facing in this market?
We have seen a continuous influx of new players into the market, trying to capture a size of the market share. We need to come up with new products ideas to identify new investment themes and be a first mover in the market in terms of delivering interesting investment ideas to the market place. ThereÆs probably only one other asset management company with structuring capability, but it is part of a bank and its structuring capability comes from the bank.
The major challenge in this region is the issue of longevity. Investors here in this part of the world treat unit trust investing more like stock investing. There is a lot of churning in the market. A large part of this is also due to the fact that the compensation structure of people selling at the bank channels are actually commission based. The other part of it is there is a general lack of culture about thinking about the long-term.
Of course, we have to balance about what is demand led and what we think the industry should develop. While we are in the forefront of innovating and coming up with pioneering products to cater to demand, at the same time we are also actively engaging our distributor banks on retirement savings products. Although the take up rate now is slow, we feel that while people are becoming more sophisticated investors, they are starting to think about the longer-term. We are already doing a lot of engagement on our distributors about that.
How are you expanding your retail business in Malaysia?
We actually donÆt have operations in Malaysia. We cover the market from Singapore. Because we donÆt have a licence there, we have to work with the local unit trust companies in Malaysia. We were one of the first movers in Malaysia in end-2006 when the Malaysian government liberalised and allowed for offshore investing and there was a lot of demand for offshore products. Our distribution network in Singapore also had a distribution network in Malaysia. It was a natural progression for us to work with some of them that have operations in Malaysia, and thatÆs how we entered Malaysia.
Our funds are white-labelled. Most of them are feeder structures where the Malaysian unit trust creates a domestic trust and then feeds into our Luxembourg funds.
You can only operate there if you have a licence. Are you planning to obtain a license or are you going to continue with your current distribution strategy in Malaysia?
For now, our strategy is working very well. Since we started working with Malaysian unit trust companies, we have become one of the largest foreign players in terms of market share of offshore products.
Is that strategy enough for you now? DonÆt you feel the need to set up an office in Malaysia?
At the moment, it is enough because we are really using the same resources. We have dedicated sales people also that go in Malaysia, but the support infrastructure is the same.
Do you see Malaysia as a global Islamic investment centre?
We have not sold sharia products in the region, but we have sold them in the Middle East. We are monitoring the situation quite closely because we need to see that the demand will be sustainable as well as scalable. At the moment in Malaysia, mutual recognition is only for Dubai funds. But if you try to set up a Luxembourg sharia fund, which is not an approved sharia regime yet, you have to feed through a local unit trust company.
At this juncture, we are seeing sharia products in the market. But in terms of size, we are not seeing significant size just yet. We are monitoring this and if we can see a sustainable trend, we will be happy to work on sharia products for Malaysia.
What kind of growth opportunities are you seeing in Southeast Asia?
On the retail side, we have seen Malaysia liberalising since 2006. You can see the appetite for offshore products increasing there. We are staying alert on markets like Thailand and even Vietnam. When regulations come up, we will evaluate them.
On the institutional side, competition is very keen. Our team started covering the institutional business in Southeast Asia last year. Since then, we have built a strong start. We are working very hard at looking at areas where we can enter into a strategic tie up with some of these institutions in the area of knowledge sharing. We want to develop that kind of relationship.
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