Chinese firms cast an eye over foreign shores

Asian asset management companies are stepping up their game to satisfy their expansion ambitions. Some of them have achieved scale and have built regional investment expertise.

The more established firms, like Japan’s Nomura, or the more aggressive, such as Korea’s Mirae Asset, have already gone global. In the past couple of years, most of the Chinese asset management companies have set up their regional hub in Hong Kong and are looking to expand.

WORTH THE WAIT?

The question now is whether Chinese companies’ shareholders, used to the fast growth in their domestic market, will have the patience to wait to grow organically outside China, states Gerard Lee, CEO, at Lion Global Investors, or whether they will follow in the footsteps of Nikko Asset Management, which after several years of trying to grow organically, finally bought DBS Asset Management.

Large asset management companies in China – but also in Korea, India or Japan – have large balance sheets and bigger ambitions, says Mr Lee.

Hong Kong-based Harvest Global Investments, the 100 per cent owned subsidiary of Harvest Fund Management, the joint venture of Deutsch AM and two domestic institutions in China, unlike its Chinese competitors, had a head start, as it benefited from the track record that Deutsche AM had already gained on offshore China and Asian equity products. The German firm transferred its assets under management, clients and team to Harvest GI, when it was created in 2009.

“We believe looking at the world through a China lens will dominate the investment themes in the coming years and HGI is very well positioned to be at the centre of such activities,” says Peng Wah Choy, CEO of Harvest Global Investments.

Anthony Ho, deputy CEO at China Asset Management, speaking at this year’s Fund Forum in Asia, explained the firm’s preference for organic growth.

He stated they are “very unlikely” to do any major merger or acquisition. He said it is very important to maintain the consistent culture within the team, the consistent investment style and investment process, adding, however, that the firm is open to cooperate, or set up JVs on a product basis, with key players having strong distribution networks in selected countries. In the spring, China AM signed a deal with Stockholm-based mutual fund wholesaler MFEX to distribute its funds in Europe.

Many domestic Asian players trying to expand in Asia, or in Europe and the US, have failed because they are up against what Lion’s Mr Lee defines as “the juggernauts, such as the Wellingtons or Schroders of this world”. But the Asian firms can and need to leverage their competitive edge, which is the knowledge of their own markets.

“Many of the Asian asset managers who are trying to go global will be the casualties of their own global aspirations, mainly because of poor execution” believes Kok Hoi Wong, chairman and CIO at APS Asset Management. Founding members, or senior staff, generally tend to stay with the new entity only until the end of the lock-up period.

Moreover, Asian companies acquiring Western companies will have even less success than their Western counterparts. The Asians can work for Western bosses, because they have done so for the last few decades. The reverse has not happened so far, he says, but it will change.

“I predict that amongst these Asian firms that attempt to go global some will succeed, and in a big way, by the middle of the century,” says Mr Wong.

Peng Wah Choy