Standard Life Investments (SLI), the fund management arm of UK insurer Standard Life, is on the hunt for strategic partners in the region, mainly in relation to product development and distribution.
It has identified China, Taiwan and Southeast Asia as key markets for expansion through such alliances, Asia head David Peng told AsianInvestor. Unlike typical joint ventures, these tie-ups will not entail equity acquisition, but rather knowledge and expertise exchange.
He is looking to forge partnerships similar to SLI's with John Hancock Investments and Japan's Sumitomo Trust Bank. SLI manages the John Hancock Global Absolute Return Strategies Fund, while Sumitomo runs Japanese equities on SLI's behalf and SLI manages the global equity portion of Sumitomo's core balanced strategy.
The partnership that SLI is seeking in China would be led by Peng's team. He is targeting Chinese asset managers, insurers and independent financial advisory firms that are looking to expand their product offerings.
As foreign asset managers are not allowed to sell products directly in China, SLI is in talks about working with local fund houses using the qualified domestic institutional investor (QDII) scheme, through which mainland institutions can buy offshore funds.
Most of these mainland managers have subsidiaries in Hong Kong, which means SLI can access Chinese investors who are coming to the city to make offshore investments. Moreover, SLI has some products registered in Hong Kong for sale to retail investors.
Peng said he saw more opportunities in the future in the institutional segment than the retail market in China, citing pension funds and state-owned enterprises, many of which still have miniscule overseas exposure. But due to QDII and the pending mutual fund recognition scheme, right now the opportunities are mainly in retail, which is where investors are focused.
Any SLI tie-up on the mainland would be separate from the one that parent Standard Life Group set up with Industrial & Commercial Bank of China (ICBC) in October.
The memorandum of understanding signed with ICBC was progressing but still in the early stages of development, said Peng. “We are finding ways where we can work together and develop opportunities on the product side, asset management side and international business side."
The alliance is useful for ICBC, which is looking to develop private banking in the UK and Europe, as well as other business on the corporate banking side, added Peng. On the product side, this could entail looking to put ICBC Luxembourg funds on SLI’s wholesale and pension platforms, or for SLI's offshore capabilities to be offered to ICBC's private banking clients.
Client referrals had not figured in the discussion yet, said Peng, but the firms would discuss this if ICBC clients were interested.
Meanwhile, in Taiwan SLI is seeking to partner master agents. The key challenge is that local regulators have become more restrictive in respect of offshore fund sales as they strive to grow the domestic industry. Hence the firm is seeking alternatives to expand into that market.
Options for SLI include providing securities investment trust companies with a sub-advisory service on fund management or distributing its international products domestically via a feeder structure.
In Southeast Asia, the UK firm aims to partner financial groups whose businesses operate in the Asean region. These are likely to be firms covering banking, insurance and asset management that are looking to expand both their product range and asset management client base and capabilities. Peng declined to name the firms SLI is talking to.
It has been in such discussions for a year in Asia. Asked if it had set a deadline for completing more tie-ups, Peng said: “The discussions with potential partners are long term. They are interested in a broad range of products and are being realistic as to their fit with client needs. It is a long-term process.”
SLI was formed in 1998 on the back of growth in third-party institutional assets for investment products and services. At that time 96% of the assets were in-house. Now close to 60% of its $390 billion in AUM is third-party assets, with two-thirds institutional and one-third retail.