Standard Chartered Bank has named Threadneedle a preferred funds provider in Asia and Europe and has agreed to sell it World Express, a small funds business acquired from American Express.
From Threadneedle's point of view, this deal is all about opening doors to retail investors in Asia. Standard Chartered, meanwhile, says its main objective was to get rid of a small, non-core business.
It's a coup for Threadneedle, which only opened its first Asian office in Hong Kong in May 2008. Standard Chartered, along with Citi and HSBC, is a prized distributor because of its reach throughout Asian markets. But these banks tend to work with a limited number of preferred partners, and winning or losing these relationships can make or break a fund manager's retail ambitions in Asia ex-Japan.
StanChart has always been known to be the most open of the three, although at the start of the decade it scaled down a supermarket approach in Asia to a more manageable number of funds on its shelf. (Citi is pickier, given its focus on high-net worth clients, while HSBC's shelf is smallest because it also has a proprietary funds operation). A StanChart bank spokesman in London says its preferred partners number "in the tens" around the world and vary by market.
The deal is nonetheless important to Threadneedle. The firm manages $73 billion of assets as of end December, a figure down from the $125 billion it ran a year ago, a loss roughly in line with the industry. But unlike many competitors, "We are accelerating our business plans in Asia," says James Campion, director and head of Asian distribution in Hong Kong. Taiwan will be an immediate area of interest, he adds. He says the firm will likely need to grow its teams in Hong Kong and Singapore in order to manage this new client by the time the agreement goes live three months hence.
The agreement with StanChart does not automatically give Threadneedle shelf space, but it had to convince the bank of its breadth of capabilities in order to win the mandate. Campion says the deal came about because distributors are reassessing their product lines and what is appropriate to sell to investors, and want to work with fund managers that have broad capabilities and the flexibility to create products that the bank wants. Threadneedle has products registered in Hong Kong, Singapore and Taiwan. Taiwan has by far the biggest retail funds industry. "That's our interest," Campion says.
Down the road, a relationship with StanChart can open doors in markets where Threadneedle has yet to register products, such as Korea, India and Indonesia. In the meantime, the deal also includes Threadneedle's acquisition of World Express, a $2.7 billion investment funds business that came with the bank's purchase of American Express in 2007.
StanChart has been steadily shedding its own asset management businesses (it sold its last onshore funds business, in India, to IDFC in March 2008) and was keen to do something about World Express. "It was a non-core business that lacked scale," says the bank spokesman. "This is [Threadneedle's] core business, they'll know what to do with it."
World Express, based in Luxembourg, consists of a pair of multimanager products with 35 sub-funds, including one managed by Threadneedle. Campion says the firm has yet to figure out what to do with the acquired business, which includes some funds that overlap with Threadneedle's existing product line, others that are distinct, and a different business profile.
Standard Chartered will also gain a 'trailer' fee, that is, a slice of the annual management fee Threadneedle charges on any funds sold through the bank. Campion would not discuss fee arrangements other than to say the deal is in line with market practice.