Nikko AM embraces re-emergence of Orientalists

Charles Beazley, head of Nikko Asset Management’s international and institutional business, has a broad smile on his face as he talks about the recent integration of the fund activities of Singapore bank DBS.

The deal added $8bn (E5.8bn) and 107 staff to the Nikko fold. The staff are expected to bring the distribution relationship with the regional South-East Asian bank to the Nikko party.

“DBS wants to be a pan-Asian wealth management bank. They recognise that bank-owned asset management companies tend not to perform as well as independents,” says Mr Beazley, also wary of private-equity owned arrangements since witnessing the demise of his previous employer, UK fund house Gartmore. “Banks find the captive model very difficult to grow.”

Products launched since the DBS acquisition include the RMB bond fund, which has already raised $250m. Mr Beazley praises the extra fire-power in Asian sovereign credit which the DBS deal has provided him with.

“They were doing things locally which we were not doing. It fits in with our philosophy of local products for local markets,” he says. The addition of 44 local funds to the Nikko platform also gives the Japanese firm a much-needed headstart in the lucrative Singapore market, with ambitions to use the base as a springboard into South-East Asia.

As part of his objective to help develop Nikko into the world’s largest pan-Asian manager, Mr Beazley has also added the A$25bn (E18bn) Tyndall Asset Management operation in Australia, the world’s fourth largest and fast-growing mutual fund market.

“Australians are growing the Asian orientation of their country very gradually,” he says. This is all part of the pattern of what Mr Beazley calls “the re-emergence of the Orientalists”, Western-educated people who love and understand Asian business, politics and culture.

While many US groups in particular are criticised for parachuting in unprepared executives from New York or Boston into Shanghai, Singapore or Hong Kong, Mr Beazley gives a different slant to his own move to Asia to join other Western refugees at Nikko, including Asian marketing boss Blair Pickerell.

“We actually choose to be there, we are not posted from Boston,” smiles Mr Beazley. “Blair has been in the region for 30 years. This is what we want to do. Our exec suite is still in the same genus as the Orientalists of the old days. This is a world away from the concept of the ‘Tour of Duty’.”

He talks about the ‘Failed in London, Try Hong Kong’ mentality of the 1990s, which has been totally reversed since the crisis of 2008, when Asian economies became the envy of the so-called developed world for their staying-power and growth prospects. “It was not cool to be a Japan fund manager in the 80s and 90s.Now Europeans have re-assessed their relationship with Japan and Asia.”

The other relationship Mr Beazley is re-assessing is the one with clients and distributors, most of whom are now demanding particular solutions, rather than being palmed off with the recently-manufactured flavour of the month by their producer. “You need to satisfy local demand,” he says.

This means absorbing strong sub-advisory trends, with up to 30 per cent of the group’s $167bn in managed assets now outsourced to third-party managers including La Salle, Ashmore, Pimco and Wellington. “We are also distributors and Japanese investors in particular take comfort in our ability to carry out due diligence and fund selection,” says Mr Beazley. “If a bank says they like a particular asset class, we can either find something for them, or take their recommendation.”

Nikko’s expansion strategy will be backed by an imminent share offering on the Tokyo Stock Exchange. Such an IPO has long been on the cards for its Japanese owner Sumitomo Trust & Banking.

“Timing is not an issue,” says Daniel Enskat, head of global consulting at specialist Asian practice Strategic Insight. “In asset management, the biggest opportunity offering faster growth compared to Europe and the US is undoubtedly Asia, from both the investment and distribution perspective.”

He says Nikko Asset Management is expected to prosper because Western investors need exposure to faster growth markets and also because Japanese clients have been investing regionally, rather than with a home bias, since the earthquake and tsunami in March.

The DBS funds acquisition adds a valuable distribution channel and profit centre for entry into the expanding South East Asian region, believes Mr Enskat, while the tactical Tyndall purchase adds another separate market in addition to the group’s Japanese home market.

Also important to Nikko is acting as a bridge to Latin America. Strategic Insight’s research shows half the assets of Chile’s $155bn pension fund system are likely to be invested in Asia.

Charles Beazley, Nikko Asset Management