Some two years after Nikko Asset Management bought Tyndall AM for $80 million, the Sydney-based firm is busy selling Australian investment ideas to yield-hungry Japanese investors.
The firm’s managing director, Mike Davis, was in Tokyo last week launching an Australian bank loan fund – a diverse pool of corporate bank loans rated investment grade. "It is designed to satisfy an increase in investor appetite for yield in the face of yen weakness,” Davis tells AsianInvestor.
He makes regular trips to Japan and describes the working relationship with Nikko as highly productive. “Nikko doesn’t significantly impact the day-to-day running of Tyndall’s business; they let us get on with it as part of their multi-local approach," he notes. "But, of course, there is overarching strategy, finance, governance and risk reporting into head office."
According to data provider Rainmaker, Tyndall is the 19th largest fund manager in Australia with A$23 billion in AUM as at end-2012. The firm was set up in 1989 by financial services group Suncorp and its clients include retail and institutional investors, private banks, superannuation funds and charitable trusts.
“We are a business that came out of Suncorp insurance group and we have a strong insurance investment management focus,” says Davis, who joined the firm in April last year after leaving Causeway Asset Management, an alternative fund firm he founded in 2003.
One of the key targets set following Nikko's acquisition of Tyndall was to cross-sell more product into Asia. “In mid- to late-2012 we launched and sold Australian dollar bond and equity funds into Japan. The Japanese have had an insatiable appetite for Australian dollar assets,” says Davis.
The loan fund launched last week is part of Tyndall’s alternatives offering. “It is a five-year closed-end fund and so far we have had most interest from Japanese life companies and regional banks that are sitting on a ton of cash,” says Davis.
“The closed-end structure has been designed to meet Japanese investor interest. Investors have been keen to lock into a rate of return that has a defined end date.”
The fund has a target return of 2-2.5% above the bank bill swap rate (BBSW), which translates to 5-5.25% in Australian dollars.
Davis says he is pleased with progress made on cross-selling, but indicates that navigating Japan’s distribution network has been less than hassle free. “We are distributing mainly through Japanese banks and distribution platforms and we are in the process of broadening these relationships.”
The Nikko acquisition has also opened up the chance to sell Asian and international investment products to Australian institutional clients, particularly the country’s superannuation funds, which manage a total of A$1.5 trillion in retirement savings.
Later this month, a group from Nikko AM’s London office is travelling to Australia to pitch its World Bank Green Fund to local investors. The group will be led by the firm’s European CIO, Stuart Kinnersley, who manages the green fund.
“This is a global bond strategy that invests predominantly in bonds issued by the World Bank that are identifiable with various environmental projects around the world,” says Davis. “The product was created for Japanese investors originally, but we expect that a select group of Australian institutions will be interested in it, based on our research.”
Another idea being pitched to local super funds and insurance clients is Asian bonds. “We are working on delivering regional fixed income exposure that will likely be done on a mandated segregated account basis,” adds Davis.
Looking ahead, Tyndall expects to see the re-emergence of inflation in Asia as a key strategic investment driver and is “developing some product opportunities around that theme”, says Davis.
Just last month, Nikko AM’s international CIO, Wang Yu-Ming, published a strategy paper claiming there were indications that higher inflation expectations are in the early stages of taking hold in the asset markets’ discounting mechanisms.
“The most compelling of these is the publicly stated inflation-targeting policy being pursued by the US Federal Reserve and Bank of Japan (BOJ). This is a huge policy change for the BOJ, which could unleash a new wave of liquidity into global financial markets,” Wang wrote.
In terms of Australian product heading north, Davis says Tyndall is “pitching a water investment strategy to Southeast Asian investors”.