Will an Asian fund house achieve global prominence?
The asset management industry in Asia has undergone big changes since AsianInvestor started in 2000. Having served as the title's founding editor and, more recently, as editorial director at Haymarket Financial Media, I’ve enjoyed a front-row seat. As my final contribution for AsianInvestor, I have come up with a list of what I consider the top five issues facing the industry.
We have already looked at whether asset managers can be 'too big to fail', pensions and insurers can survive negative interest rates, active managers are worth their fees and technology will render many asset management activities obsolete. Here is my fifth and final question.
Will an Asian asset management company achieve global prominence?
This is probably a ‘when’, not an ‘if’. But so long as the ‘when’ takes a very long time to be realised, it feels like an ‘if’.
AsianInvestor’s most recent survey of fund houses accruing assets from clients based in Asia Pacific showed that Western firms have been struggling – admittedly partly because of unrelated fluctuations in exchange rates – while local, notably Chinese, firms have grown at a fast pace.
Chinese and some Korean asset managers harbour globe-spanning ambitions. Tokyo-based Nomura Asset Management has a global business but mostly for managing Japanese equities. Nikko AM, another Japanese firm, has gone the furthest in creating a pan-Asia business, although its strategy of acquisitions and joint ventures makes it more a collection of separate business units than a cohesive whole.
Korea’s Mirae Asset has the beginnings of global reach. Its early expansion was fuelled by its domestic success; when its local equities business tumbled, its global operations seemed to slow down. The firm seems back on a growth path, and is trying to integrate its overseas acquisitions, such as Canadian ETF provider Global Horizons, into a holistic offering.
But Chinese and Korean firms suffer from outdated managements; the patriarch is still expected to call the shots. This doesn’t work in a world of complexity.
Mirae is an exception in Korea; but in China, there are plenty of firms that have set up in Hong Kong with the intention to go further. And many of them have enjoyed a rapid accumulation of assets to help finance their expansion. These companies often think big, even if their capabilities aren’t quite up to scratch.
Accessing Hong Kong gives them a huge advantage that local fund houses in other countries cannot match. China’s market opening – its interbank bond market, the various channels for cross-border flows, the new mutual recognition scheme for funds – will give its asset managers more opportunities to experiment. The risk, of course, is macro: that China itself – engorged on credit, bloated property and dangerously opaque financial linkages – suffers a crisis. In that case, no mainland financial institution would be safe.
Even so, when the ‘when’ is realised, the odds are it will be a Chinese company making the leap. A domestic crisis would simply delay it happening a little longer.