Ajai Kaul, AllianceBernstein’s Asia Pacific chief executive officer, is retiring at the end of the year after more than three decades working for the “extraordinary company” in Asia.
Kaul, who plans to travel to Antarctica with his family after retiring, reminisced about those years during an hour-long interview with Tan Lee Hock, founder and publisher of Asia Asset Management, and senior finance reporter Hui Ching-hoo, at AllianceBernstein’s office in Hong Kong’s Quarry Bay district.
He highlighted key milestones achieved, the firm’s competitive advantages rooted in a distinctive culture, and shared his thoughts on the future of the asset management industry.
Kaul joined AllianceBernstein in 1994, tasked with setting up the company’s business in India.
“I spent my entire AllianceBernstein career in Asia. I consider this an extraordinary company because of its client focus, unique culture, remarkable people and a wonderful spirit of collaboration and partnership,” he says.
He believes AllianceBernstein’s proactive approach sets it apart from peers. According to Kaul, the company excels in recognising emerging opportunities, testing innovative ideas, and acting decisively when the timing is right.
AllianceBernstein has now established deep roots in Asia, especially in Northeast Asia. But it is still working to develop a foothold in markets like China, where it faces stiff competition from more than 120 local and international fund management companies.
According to Kaul, patience is key to succeed in these markets. He says AllianceBernstein is making progress, with an active domestic fund launch programme, while also teaming up with Chinese banks on overseas investments using their quotas secured under the Qualified Domestic Institutional Investor or QDII scheme. The company also distributes its Luxembourg-domiciled funds in China through these banking partners.
He says India may also offer considerable cross-border investment opportunities for the firm.
Passive investing
Under Kaul’s watch, AllianceBernstein’s Asia Pacific retail assets have surged more than ten-fold since 1994 and now stand at around US$140 billion.
The firm has pioneered numerous innovative initiatives to distinguish itself in the region. For instance, it was the first to introduce currency-hedged share classes and stable income share classes.
AllianceBernstein was also among the first international managers to build relationships with Chinese banks when the lenders started to establish business in Hong Kong 15 years ago.
The firm is also putting more focus on passive investing, launching its first Taiwan active exchange-traded fund in August this year, and partnering with Japanese financial conglomerate Strategic Business Innovator Group to establish a joint venture in Japan dedicated to active ETFs.
Private markets
According to Kaul, rapid growth of private asset classes such as private credit creates new opportunities for investment managers.
He predicts that global equity markets will continue to shrink due to delistings and corporate buybacks, among other things. And banks are expected to withdraw further from lending, creating opportunities for private capital to step in.
“Private markets are now well-established and are poised for significant growth in the coming years,” Kaul says.
The trend toward private investment is transforming portfolio construction strategies, with new asset classes like infrastructure financing offering differentiated return streams with low correlation to public markets.
Still, public markets are likely to continue to play a crucial role in hedging against inflation. Kaul says it’s important for asset managers to seamlessly integrate private and public assets into a comprehensive, balanced solutions for investors.
He foresees a realignment in capital deployment strategies as trillions of dollars of wealth in the Asia Pacific region are transferred across generations over the next five to seven years.
“We anticipate a considerable movement of funds out of traditional bank deposits and into a variety of investments, many of which will be new or entirely different from previous asset classes,” he says.
Kaul considers inadequate pension coverage to be a key challenge in Asia, saying that the region lacks robust private options that can effectively supplement public pensions.
