Pioneer seeks Indian expansion

Having just recently got the regulatory go-ahead for its joint venture with Bank of Baroda, the 4th largest public sector bank in India, Pioneer Investments is refocusing its distribution strategy in Asia, which, until a few months ago revolved mainly around developing a wholesale business in Hong Kong, Taiwan, Singapore and Japan, where the firm manages around $3.5bn in total. Through the new venture, which gives Pioneer Investments a 51 per cent stake with management control in the resulting entity - called Baroda Pioneer Asset Management Company - while Bank of Baroda holds the remaining 49 per cent, the firm is now pushing to make significant inroads into the Indian sub-continent. “It is absolutely key to have a strong local partner,” said Angus Stening, CEO, Asia and Emerging Markets at Pioneer Investments. “And the best local partners you can align up with in India are public sector banks, because the infrastructure is already established, the national reach is already there and the customer basis already exists.” Potential for growth Although public sector banks account for the distribution of only 3 per cent of the $133bn total fund assets in the Indian sub-continent, “one of the pure attractions of the public banking sector is the potential for growth,” said Mr Stening, reminding us that, after all, the mutual funds industry in India just started in the mid ’90s. “In the first instance, we will focus very hard on leveraging the Baroda 2800-strong branch network,” he explains. As the large majority of Baroda customers are deposit holders and the investments are prevalently in local currency Indian strategies, the firm aims to offer “choice in domestic strategies, introducing very basic, straightforward fixed income and equity products, probably in a bond or balanced strategies.” Mr Stening has ambitions growth plans for the business and has intentions to expand the existing small investment team rapidly. “We will bring a lot of our global expertise into the Indian investment business, and we will leverage our Singapore operation which manages our Asia and Indian strategies,” he says. In India, like in Asia in general, the majority of fund flows has typically been generated through new fund launches. Marketing and distribution tactics aim to get investors always interested in new themes. “This is not very healthy for portfolio managers,” said Mr Stening. “What we promote, and the industry needs to promote, is a longer term sustainable investment as opposed to just following the latest trend.” This vision is actually backed by the Indian regulator which forbids an asset manager to launch more than one product in the same strategy. “As we build up assets, and investors get more confidence, we will be able to introduce some of our strategies that we are selling elsewhere around the world that we feel would be appropriate to Indian investors, to diversify themselves from the Indian story and start getting some exposure outside India,” he said. Indeed, in India the foreign investment strategies that a company can offer are capped to a percentage of the overall assets that are raised trough the asset management company in the country. “So the more assets you have under management in India, the higher your quota for foreign investment strategies,” he explains. Regional presence If Mumbai is the headquarters of the production factory, expanding regionally throughout the country is key to access the broader IFA network, which accounts for 45 per cent of the distribution of total funds assets in the country, said Mr Stening. “The branches can be as simple as a guy on a bike running from house to house selling products,” he said, announcing plans to open a handful of key regional offices. Previously CEO in the Central and Eastern European countries, Mr Stening is looking to replicate in India Pioneer’s successful experience in Poland, where the firm grew to a $8bn business over the past 8 years, leveraging on the joint venture between parent company UniCredit with Bank Pekao. “Dealing with a public sector bank presents challenges in terms of changing methodologies, flows and compensations schemes,” he said, “but a large part of Pioneer Investments’ distribution is through UniCredit and through our banking affiliates. We are very used to working closely with banking partners and managing the product training and the selling process right down to the branch level.” Pioneer Baroda’s goals are to become one of the top ten managers in India within the next five years. “To be successful in Asia, which is a very fragmented market, you need a good brand, the right service model, a proper performance and you need patience.”

Stening: “It is absolutely key to have

a strong local partner”