Threadneedle has completed its acquisition of Standard Chartered Bank's World Express Funds business. The transaction, which was first announced earlier this year, provides Threadneedle with an established Luxembourg-based Sicav platform that includes 35 funds with total assets of $2.38 billion and expands its distribution reach in Asia.
The Sicav platform that it inherits from World Express Funds broadens Threadneedle's own product range and opens up new distribution channels in Europe and Asia through Standard Chartered Bank. The deal provides Threadneedle with instant access to the very lucrative Taiwanese market, which World Express Funds was able to penetrate with much success.
The deal also makes Threadneedle a strategic partner of Standard Chartered Bank, making the fund house one of the global preferred fund providers of the bank. Threadneedle's relationship with Standard Chartered Bank is also expected to open doors in markets where Threadneedle has yet to register products such as Korea, India and Indonesia.
"The strategic distribution deal with Standard Chartered Bank is of particular importance in Asia because of the strength of its consumer and private bank in the region," says William Lowndes, London-based head of US and Asia distribution.
Under the deal, Threadneedle will provide a line up of funds to Standard Chartered Bank's consumer and private banking operations. Lowndes expects the initial line up to consist of around 20 funds that would best represent Threadneedle's international fixed income and equities investment capabilities. The offering is expected to initially be biased towards equities at the initial launch.
"We're very keen to work with Standard Chartered Bank to develop new products for their distribution and that means new products and more products from our existing fund range," says Lowndes "Twenty is just a starting point."
All 20 funds in the initial line up are already registered in Hong Kong and Singapore.
In Taiwan, the product offering will continue to focus on the fund range of what was previously World Express Funds. Many of the World Express Funds' 35 portfolios are registered in Taiwan and have been distributed widely in that market.
"We intend to build on that distribution in Taiwan by adding Threadneedle products," says James Campion, Hong Kong-based head of Asia distribution.
World Express Fund portfolios will carry the Threadneedle brand from this week onwards. But the individual fund names will undergo new branding within the next couple of months. Looking ahead, the emphasis will change in terms of Threadneedle products depending on what is already on offer at Standard Chartered Bank, what their consumer and private banking clients are looking for, and the conditions in the various markets in Asia, says Lowndes.
"There will be, for us, a difference in focus. Because Asia is so important to Standard Chartered Bank because of their presence and scale of distribution in the region, Asia will be the primary focus for us in terms of supporting them," says Lowndes.
Prior to the deal, Threadneedle focused on private banking and insurance clients. "This move is a very solid one in terms of broadening that distribution network, but also to focus on consumer banks in Hong Kong, Singapore, and Taiwan," says Campion. "Taiwan in particular is a very consumer banking and retail oriented market."
Threadneedle's expectations from this expanded distribution network are modest. "I think we have to recognise that we are acquiring this distribution channel and the fund range, but we have quite a lot of work to do in Taiwan and in the rest of the region to build Threadneedle's overall brand and to educate investors of Threadneedle's capabilities," says Lowndes.
He says Threadneedle is particularly excited about the prospects for growth in Taiwan. "We will focus quite a lot of resources on brand building in Taiwan and we expect to be building assets in Taiwan this year, but I am not going to put a number on that at the moment." Lowndes says. "We think Taiwan will be a very significant market for us over the next two years."
In markets where Standard Chartered Bank doesn't have a strong presence, Threadneedle expects to carry on with its own expansion plans. The fund house has a broader strategy in Asia that goes beyond the Standard Chartered Bank deal. In the next few months, Threadneedle will be examining all the markets in Asia, assessing its capabilities outside of the Standard Chartered Bank deal, and proceeding appropriately.
"What I think this deal does for us is it increases the infrastructure and the capabilities that we have in the region. There's no doubt that we will want to look at all the markets in the region, but we will want to start with the larger markets first like Hong Kong, Singapore, Taiwan and Korea," Lowndes says. "The deal is a catalyst for Threadneedle and not an end in itself. It invigorates our efforts in Asia and gives us more resources."
Threadneedle manages around $72 billion in assets. The fund house is a relative newcomer in Asia, having opened its first Asian office in Hong Kong in May 2008. It hopes to establish offices in Taiwan and Korea in the foreseeable future.