Partnership and product innovation are key in Asia
Interview with Andrea Cattaneo (pictured) and Margaret Harwood-Jones at BNP Paribas Securities Services – A recent survey released this April by BNP Paribas Securities Services in conjunction with consultancy group Knadel found that the three key Asian markets – Hong Kong, Singapore and Taiwan – met or exceeded the expectations of 75 per cent of European asset managers currently distributing UCITS funds there.
Despite this, some commentators have suggested that these markets, in particular Hong Kong, are becoming more difficult to gain access into.
Speaking with Hedgeweek, Andrea Cattaneo, head of asset manager solutions at BNP Paribas, confirms this trend for two main reasons. Firstly, regulators are wary about UCITS using derivatives strategies – ie the famous “Newcits’. Secondly, the crisis is not playing in favour of European strategies and products. Nevertheless, Cattaneo affirms that in order to be effective at selling UCITS funds in Asia, managers need to be dedicated and have a solid network, and cites three trends developing in the region.
“Firstly, despite the changing environment, it remains true that it is easier to establish funds in these three cross-border centres than in the rest of Asia. Secondly, we see a trend in emerging markets – Malaysia, Thailand and South Korea – for new opportunities in the future through sub-products. The third large trend we’ve identified is that some markets, like Japan, are more resistant to direct distribution of foreign products than others.” Cattaneo notes that a recent study by Sumitomo bank found that over 80 per cent of money allocated by Japanese investors to offshore funds goes into UCITS funds through indirect distribution flows.
“To be effective in Asia, asset management companies need to be committed. There are different ways of achieving this. Large firms like Fidelity have been in Asia for many years, building their own sales capability and network. For mid-tier asset managers, the key word is ‘partnership’; identifying the right partners in these Asian markets is crucial as they can help achieve sales targets. Moreover, some Asian asset managers are looking to Europe as a market for distributing their own products.
“Therefore, mid-tier and boutique asset managers in Europe and Asia, each offering different capabilities, can leverage on these differences to help grow their businesses together and identify reciprocity.”
The market share of cross-border products in Asia has grown from 21 per cent in 2001 to 43 per cent in 2011. Cattaneo notes that around 13 per cent of UCITS funds are sold outside Europe, with Asia accounting for 9 per cent of the market.
“There is a strong appetite on the part of Asian investors to invest in UCITS. There’s no doubt that UCITS is a popular, well-understood brand in some of those leading markets in Asia,” comments Margaret Harwood-Jones, Head of Client Segments – Asset Managers & Alternative Investments at BNP Paribas Securities Services.
“It’s almost in a class of its own: Asia would struggle to develop an equivalent passport.”
Expanding on the passporting point within the context of Asia’s fragmented, multi-jurisdictional marketplace, Harwood-Jones adds: “Are you going to waste time and energy working through the complexity of establishing a pan-Asian passport? Or is it smarter and brighter to use something that is already tried and tested: for us, we think that encapsulates the UCITS story in Asia.”
Concludes Cattaneo: “For European managers, innovation of products is key if they want to penetrate the Asian market and access distributors, otherwise competition will be extremely tough.”
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