Apac coming to the boil as rest of the world snoozes

The Asia Pacifc (Apac) growth story is old news to tired ears but there has been a flood of information over the last months that underscores the strategic importance of the region in the wealth management space. As such, while the rest of the world snoozes through the heat of summer, Apac’s insomniacs have been hammering out their strategic business moves through deal making and hiring.

Recent activity has been significantly marked by deals, not acquisitions, however, but strategic partnerships or joint ventures aimed at building out expertise and distribution. The absence of cash changing hands as part of the deal activity is no surprise, given the high cost of M&A on a price to assets under management (P/AUM) basis in the Apac market. Cross-border Apac deals hit a P/AUM of 6.9 per cent compared to a market average of 4.7 per cent.

Significant partnerships in Q2 and early Q3 included Kotak Mahindra, the Indian financial services firm, signing a partnership deal with the Hong Kong asset management arm of Canadian financial services firm Manulife, Manulife Asset Management (Hong Kong) for distribution and investment expertise and Standard Life Investments (SLI) signing a cross-advisory and distribution deal with Japanese bank Chuo Mitsui Asset Trust and Banking.

Partnering with skilled cross jurisdictional talent is deemed a pathway to enhanced capability and ultimately business development.

The Kotak-Manulife deal comes at an interesting time for the Indian market as local banking sector regulator, the Reserve Bank of India, has initiated a review of bank ownership rules and released a discussion paper on 11 August.

The end result could be the return of the country’s huge industrial groups such as Tata and Reliance with their own banking businesses, and non-banking financial firms gaining full licences. All in, greater competition for existing market players such as Kotak Mahindra.

Interestingly, the discussion paper also includes an amendment possibly capping foreign investment in new banks at 50 per cent with a 10 year holding requirement. A JV in India may now be the right route to market.

The UK-Japan link-up of SLI and Chuo Mitsui, meanwhile, followed previous deals from players from these two markets such as Mitsubishi UFJ Trust and Banking Corporation’s 10 per cent stake in Aberdeen Asset Management and July’s deal between Sumitomo Mitsui Financial Group and Barclays Wealth.

Two highly developed markets are clearly looking at distribution through new development lenses, and possibly without the huge expense of setting up or without having to buy established local brands.

While all of this has been taking place, of course, the news flow around hires has not abated and several of the major local and international names including ABN Amro, Bank of Singapore, Citi, DBS and UBS have been positioning themselves with key senior personnel moving around.

Finally, expanding on its efforts in the wealth space, Standard Chartered announced a gearing up of its efforts to chase the affluent market across the Apac arena with the recruitment of 800 staff across its newly-launched Preferred Banking solution over the next 12 to 18 months.

In terms of sizing the opportunity, the British-listed bank believes the Apac region holds about 18m affluent individuals, each with at least $100,000 to invest, and offers a pool of a further 42m individuals that can be considered emerging affluent. StanChart plans to bring on board the new recruits as it rolls-out the solution across the region over the next 24 months.

The evolution of the strategic approach to the Apac space is clearly fast moving, at least in the sense that so many firms are gearing up. Judging the winners and losers will become clearer in the next 12 months.

Karl von Bezing and Graham Harvey are Directors at wealth management think-tank Scorpio Partnership.