SG Asset Management is in talks with potential joint-venture or strategic partners to expand into Korea, says Mahendran Nathan, Singapore-based managing director and regional head of business and marketing.
The firm is still looking at multiple ideas. One could be a JV investment trust management company (ITMC), although Nathan acknowledges that many other companies trying this have failed. Depending on the final domestic partner SGAM works with, the means in which it enters Korea may differ. But Nathan says he wants to get business underway as soon as possible.
To that end the firm is concurrently searching for a native Korean head of marketing who will be based in Seoul - and can take some of the pressure off Nathan, who is now selling to Korean institutions himself. Once the right person is identified, the firm will also need to determine the position's exact title: Nathan wants the person to be empowered to represent SGAM without Nathan having to visit so regularly, but also concentrate on business development, not administration.
SGAM is also now registering its Sogelux line of mutual funds with the Korean authorities, not just for the institutional but the retail and high-net worth markets.
Korea is seen as the completion of the firm's regional presence, although Nathan is still working to beef up its overall presence in North Asia.
Since arriving at the firm in 1997 from Deutsche Asset Management (via Morgan Grenfell), Nathan has overseen a huge expansion in line with SGAM's overall growth. The firm had $90 billion under management when he joined, and today has $240 billion, thanks to both organic growth and acquisition. In 1997 it had an office in Singapore with a small crew managing a few million dollars for European clients. Today it manages $5 billion out of Singapore, for Asian and European clients, and the firm sources $5 billion from Asia.
Beyond its hub in Singapore, the firm has two securities investment trust enterprise JVs in Taiwan, one with Taiwan International Investment Management and one with Sheng Hua (inherited from SGAM's acquisition of TCW). It also has a JV with China's Baosteel in Shanghai. It entered the Hong Kong retail fund space in 2001 and has become many bank distributors' go-to house for structured products.
Following this, Nathan wants to hire at least one person to assist Clifford Mak, who handles institutional business development for Greater China, and two people to assist the recently hired Doris Wong for retail and high-net worth distribution.
On the retail front, Nathan acknowledges that SGAM is a latecomer and faces an incumbent problem when it comes to distribution. As the most recent edition of AsianInvestor magazine explores, bank distributors have moved to a model of having a dozen or so strategic partners for funds; SG has succeeded in filling niches for guaranteed funds, but its rivals are already providing banks the full range of traditional asset classes.
Nathan is heartened by recent experience in Australia, where SGAM only entered in June, 2002 but is now white-labelling funds for local distributors. He notes that SGAM happened to enter Asia retail when guaranteed funds were the hot item, and he hopes the firm's ability to meet distributors' needs will be remembered as investment preferences change.
"It is a challenge to break in," he says, particularly because banks pick partners not just on the basis of performance, but for administrative simplicity and after wrangles over fees. Nonetheless, wholesale distribution is the profitable side of the business, so SGAM will keep chipping away.
To that end, SG has just begun in Singapore to approach banks regarding portfolios in mortgage-backed securities, US high yield and US equities.
But it is also bowing to the reality that for now banks want it to provide structured products. To that end it has just launched its third guaranteed fund in Hong Kong, offering investors exposure to a basket of credit-linked notes. Recognizing increasing demand for income, the fund promises a 6% return after five years, with a third of that granted after year one.
On the more bread-and-butter side, servicing institutions, the firm has made headway despite being a relatively new player in Asia. Although Nathan says SGAM is now on the investment consultants' lists in this region, most institutions in Asia still don't use consultants - unlike the US, UK or Australia. So direct marketing has enabled the firm to amass over $2 billion in institutional mandates from Greater China alone.