Local talent key to success in Asia fund manager JVs
05 September 2014
Category: News, Asia, China, Global, India, Korea
By Daniel Shane
The most successful asset management joint ventures (JV) in Asian countries including China, India and Korea are typically those that predominantly hire local talent, according to a report by Cerulli Associates.
The Boston-based consulting firm’s Asian Business Strategies 2014 study advised that offshore asset managers kept foreign staff – particularly in key positions – to a minimum when entering JVs in these markets.
Cerulli said that employing a local staff base allowed these JVs to be run in a similar way to their wholly-owned counterparts. "This gives the foreign asset manager the ability to leverage its local partner's distribution network and local knowledge," said Yoon Ng, Asia research director at Cerulli.
Cerulli’s report also found a correlation between the size of foreign holdings in an Asian JV and its overall success in that market. For example, those JVs that had a foreign-owned stake of 34% or less had an average AUM of 49.8 billion RMB (US$1.8 billion), compared to 21.9 billion RMB for those that had an active foreign partner.
The consultant added that it expected consolidation in those Asian markets where overseas asset managers are required to have a local partner, such as China.
"This is likely to lead to more merger and acquisition activity as well as the establishment of more foreign-local joint ventures in the different Asian jurisdictions," Ms. Ng continued.
A number of foreign asset managers have of late pulled back from the mainland Chinese market, where they are required to have a local partner. In May, BNY Mellon agreed to sell its stake in BNY Mellon Western Fund Management to Shanghai Leadbank Asset Management. A month later, it was reported that State Street Global Advisors (SSGA) was looking to offload its entire 49% stake in its Mainland JV, SSGA Fund Management Co Ltd.
Ronald Wan, chief China adviser at Asian Capital Holdings, told Asia Asset Management at the time that a number of Sino-foreign financial JVs are struggling because of differences in expectations, operation, and culture.
“Apart from below-par track records, foreign companies decide to part with their local partners because they will be able to make use of the soon-to-be-launched Shanghai/Hong Kong Stock Connect to distribute their products in the territory,” he added.
Separately, Cerulli forecast mutual fund assets in Asia ex-Japan would grow from $1.34 trillion at the end of last year to $2.27 trillion in 2018. Much of this growth would come from emerging markets including China, Philippines, Indonesia, and Malaysia, the firm said.