Sumitomo Mitsui AM reviews Asia distribution model

The Japanese asset manager is looking at alternative ways of distributing its products in Asia such as through private banks, its Hong Kong head tells AsianInvestor. It also has plans to boost its headcount.
Sumitomo Mitsui AM reviews Asia distribution model

Japan’s Sumitomo Mitsui Asset Management (SMAM) is reviewing its offshore fund distribution strategy in a bid to grow its Asia AUM.

The asset manager, one of Japan’s five largest, said it was considering moving into alternative sales channels such as private banks or other intermediaries.

SMAM also plans to hire additional analysts for its Hong Kong office as it deepens its coverage of Asian equities.

Tetsuya Shimode, managing director at Sumitomo Mitsui Asset Management (Hong Kong), told AsianInvestor that the firm's current offshore distribution model sees it supply its funds and investment capabilities overseas through international fund houses via a white labelling model. In Japan, the manager sells to the retail market via distributors such as banks, IFAs, brokers and online platforms.

Shimode said there was a plan to use different sales channels overseas in the future but “it requires deep thinking”.

“It is a step forward. The company has an objective to become a larger operation in Japan and overseas,” he told AsianInvestor, but declined to provide details on expansion strategy and timeline.  In addition to organically growing its business, it has been reported that SMAM would consider an acquisition of either a local or international firm.

Shimode said that Japanese fund managers had to factor in the Asia Region Funds Passport (ARFP) scheme in their regional expansion strategy, in case Japan joins it. Industry players, including Aberdeen Asset Management, have expressed a desire for Japan to participate, which Tokyo is considering. 

Commenting on the Hong Kong-China mutual recognition scheme, Shimode said there was no rush for firms like SMAM to participate. “Even for established fund operations, they have to build a business model around mutual recognition,” he noted. Profitability has to be looked at given that fund houses have to work with counterparts or agents in China.

“In our case we take these kind of initiatives through close observation,” he said, adding that the Shanghai-Hong Kong Stock Connect scheme provided an easier cross-border trading option.

SMAM was granted a qualified foreign institutional investor (QFII) licence in 2006 and since then has been investing in Chinese A shares and renminbi-denominated bonds.

In Japan, SMAM was ranked No 5 in investment trust business with ¥5,633 billion ($45.5 billion) in AUM, and No 6 in institutional business with ¥7,393 billion in AUM, as of July 31 last year.

In Asia, SMAM has a subsidiary in Hong Kong and a representative office in Shanghai, which Shimode oversees. Neither offices have sales or marketing functions as they house only portfolio managers and analysts covering Asian equities, including China.

The Hong Kong office recently hired an analyst, who Shimode declined to name, bringing its total number of investment and analyst staff to 10. Shimode said the firm would hire additional analysts as it deepened its coverage of Asian equities.

SMAM has subsidiaries in London and New York, which contribute to its global research platform. In 2012 it formed a joint venture asset management firm with Singapore’s UOB Asset Management in the city-state.

SMAM is a research-driven manager specialising in Japanese, Asian and China equities, alternative funds and real estate investment trusts (Reits). It was ranked No 17 in AsianInvestor's top 100 fund houses by regional asset size for 2014.

Its shareholders are Sumitomo Mitsui Banking Corp, Sumitomo Life Insurance, Mitsui Sumitomo Insurance, and Mitsui Life Insurance.

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