Standard Life Investments (SLI) is mulling adding research and portfolio construction to its growing distribution activities based in Asia-Pacific.
The $250 billion manager – which is 100% owned by Standard Life Group but bills itself as 99% autonomous – this April hired an emerging markets debt team from Threadneedle Asset Management in London, led by Richard House and comprising Mark Baker and Nicolas Jaquier as investment directors.*
“That was a big signal that we have recognised a weakness in our global product capability and are starting to fill the emerging [market] suite quite actively,” Colin Clark, head of the global client group, tells AsianInvestor from its office in London’s Gherkin.
SLI has business development staff across Asia-Pac, with two (set to be three) in Tokyo, five in Sydney, three in Hong Kong, one in Seoul and two in Beijing, and plans further hires. It also has a dedicated Asia support team of three in Edinburgh.
With more than 1,000 people worldwide, it provides global exposure to equities, fixed income, private equity, real estate and absolute return via an investment team of 110 in Edinburgh, with a further 40 in Boston and Montreal.
Asked how the firm covers Asian equities, Clark concedes this is its Achilles heel. “We have real estate research based in the region and are reviewing the possibility of placing more research there at the moment,” he says. “Making a more serious commitment to the region in terms of research and portfolio construction is highly likely over the next couple of years.”
In fact, SLI previously had half a dozen staff doing research and portfolio construction out of Hong Kong a decade ago, but pulled back in 2007.
“In early stages of development when SLI was trying to develop product, particularly global equity product, like many firms there was a debate internally about whether a global team located centrally or being highly diverse was best and it was better to be based in a region,” explains Clark.
“For us, the diverse worked in the US but it did not work so well in Asia. We had a small number of people there but it was not really working in a regional or global context.”
That, however, looks set to change. He confirms that SLI is looking to add a research capability probably in Hong Kong and possibly Beijing.
“Will that be combined with portfolio construction activity? That depends on what we are constructing, but if there is merit to having that in the region, I am sure that will follow,” notes Clark, who has just been visiting clients in Singapore, Malaysia and Hong Kong.
“We have a number of components of equity and now debt in the emerging markets sphere, but we are playing a bit of catch-up in terms of regional market exposure and activity.”
SLI is considering how to make use of its EM debt capability, including derivative ideas such as how to link EM debt to equity, how to structure balanced products and potentially how to do EM absolute return.
Clark notes that SLI has 50-60 target clients in Asia-Pacific, including institutional investors in China, Taiwan, Hong Kong and Australia, private banks in Singapore and a handful of financial intermediaries. It is also reviewing wholesale distribution opportunities.
SLI has been expanding its product suite and third-party client base since 1998, when it managed $120 billion solely for UK life assurer Standard Life (mostly UK-oriented equities, fixed income and real estate).
It started offering its diversified platform to UK investors first, before branching further afield to Europe, North America and now Asia.
In the UK it has the best-selling fund this year to the end of April, with inflows of $2.2 billion into its Global Absolute Return Strategies (GARS) fund, according to data from Strategic Insight. That puts it as third fastest-growing manager in the UK over the period, behind M&G Investments and BNY Mellon. It launched its Gars strategy four years ago and it now has over $22 billion, notes Clark.
He says the next step for SLI is providing investment understanding and research from Asia-Pacific, describing having a window on what is happening in Greater China as important.
“That is not a capability we have at the moment. Whilst our Asia build is at a relatively early stage, I think you can say, 'Watch these guys, they have done it [expansion] elsewhere and now they are looking to do it in Asia.”
SLI signed a strategic JV in July 2010 with Japanese trust bank Chuo Mitsui, which subsequently merged with Sumitomo Trust. It outsources management of Japanese equities to that entity and in turn manages all Mitsui’s global equities. SLI also owns 40% of HDFC Asset Management in India.
*Threadneedle subsequently announced it had appointed Clifford Lau from Pramerica in a new role as head of Asia-Pacific fixed income based in Singapore, and Zara Karayan from G2 Capital Partners as fund manager for emerging market debt based in London.