Eastspring aims to deliver bang for European buck

Bursting with energy and ideas, Michele Bang, deputy CEO of rising Asian investment force Eastspring Investments, is visiting Europe to gauge potential interest among fund distributors and private banks.

But she is not too impressed with what she has seen at some conferences and seminars, lacking women speakers and representation from Asian investment groups. “Why can’t we have some Asian managers involved in the debates? This would give us a much more balanced view,” she says about a European fund management agenda obsessed with a narrow band of issues, particularly the Retail Distribution Review.

“They need to come to come to Asia to see much more important and interesting issues in asset management,” says the combative, Korean-born manager, who left Deutsche’s asset management arm shortly before a root-and-branch re-organisation.

These “issues” include finding the optimal structure and business model for mutual fund production and distribution, so that investments can be made more accessible to individuals in many markets.

This must be coupled with improving education of potential customers – about long-term growth stories – and fostering their trust in the industry.

Eastspring has been getting the answers to some of these challenges right, as managed assets recently surged past the $100bn (€74bn) barrier. But so far 92 per cent of these originate in Asia and it is now part of Ms Bang’s job to further boost brand recognition in Europe, following the opening of a regional headquarters in London last year.

Her wide-ranging global role includes responsibility for the firm’s distribution, product management, marketing and branding across Asia, the US and Europe.

The group sprang out of its owner, Prudential Corporation, which has the benefit of distribution tentacles throughout Asia, “with fantastic market positions in Indonesia, Malaysia, Hong Kong and Taiwan,” says Ms Bang.

Eastspring is also managing life insurance money in Vietnam and has joint ventures in both China and India and there is clearly much reliance on the Prudential brand, particularly in South East Asian markets, where the life company has pole position locally.

“We are talking about the whole local fabric of the market,” says Ms Bang. “People see the Prudential brand as a trusted insurance partner.”

Now it is part of her mission to make sure the recognition of the Eastspring franchise starts to approach the blanket coverage of its life company parent.

Eastspring differs from Asian competitors such as Mirae and Nikko in that it has true pan-regional roots, rather than simply sourcing most money from a single domestic economy, she claims.

Rather than benchmark her group against such regional champions, Ms Bang prefers comparisons to global giants such as JP Morgan, Fidelity, Deutsche and Schroders. These are the type of names against which shares in various Asian markets are measured and against which her group’s distribution strategies must shape up.

Eastspring was created in 1998, building on the joint venture of the Prudential insurance company with Indian bank ICICI, before spreading out rapidly into a pan-regional retail fund distribution network.

“Our investment teams are in nine markets in Asia. Prudential is a global name,” says Ms Bang.

Although the Singapore investment hub currently manages a $20bn (€14.7bn) mutual fund suite, Eastspring prefers developing management expertise in each local market and exploiting on-the-ground facilities pre-existing through the Prudential framework.

“We don’t have a grand strategy of gathering AUM and putting it on a platform to create scale,” says Ms Bang. “We already manage local money and have huge infrastructure in every market.”

While there is a group-wide risk management function, the local franchises operate with a large degree of autonomy. “I wouldn’t exactly call them boutiques, as there is a consistency in the way they manage money,” says Ms Bang, referring to a relative-value-based stock-picking philosophy which resonates across all its chosen investment destinations.

“But when we manage equities for local markets such as Indonesia or Korea, the style of management can be completely different. So we don’t just manage money in one centre and roll it out.”

A key goal for Eastspring– in Asia as in Europe – is to boost education and confidence among retail investors, believes Ms Bang. These challenges have been particularly acute in the Chinese market, where the QDII scheme, allowing domestic investors limited access to foreign instruments and markets, has flagged and failed to meet market expectations.

“Unfortunately, the Chinese retail client base did not have a positive experience investing outside their home market,” she says. “If we can get closer to a market, we can find out the best ways to deliver products. Our challenge is to help investors in markets such as China become more comfortable with what we provide.”

This closeness and comfort is achieved through tighter collaboration with distributors, she suggests. Most of these, including the likes of Citi, HSBC and Standard Chartered, tend to be global groups with strong Asian interests, with local banks playing a still significant, though lesser role.

“For instance, global distributors make up 75 per cent of the Hong Kong market,” she says. “By virtue of the fact that they are so big, everyone in Hong Kong wants to talk to the big three global banks.”

The road ahead for Ms Bang’s company in Europe, one of the chosen growth markets, could be a trickier one and this is something she acknowledges.

There is no real distribution network to exploit, meaning Eastspring will need to attack the quasi-institutional wholesale market, rather than the retail arena which has brought so much success on home territory.

“It goes without saying that the European fund industry is going through difficult regulatory changes,” says Ms Bang. “But this is just the beginning of long-term awareness from investors in markets outside Asia valuing and investing in Asia.”

While Asian investment houses need to understand the regulatory and business constraints of European distributors, the latter must also come to terms with the long-term strategic nature of the Asian investment story, she believes.

“European distributors have been obsessed with European and US equities,” says Ms Bang. “But we have not really seen any outflows or slowdown in allocations. Many institutions are thinking of increasing allocations to Asia. We have never got the sense that they are re-allocating away from our markets.”

The main challenge is one of educating distributors about the long-term Asian phenomenon. Until now, Eastspring has serviced private banking partners from Singapore. It is finally time, believes Ms Bang, to take the battle to London, Luxembourg and Geneva, and to spread the word about Asia on the banks’ own European doorsteps.  

Asian Passports: Dream or nightmare?

The concept of an “Asian Passport” for investments – similar to Europe’s Ucits umbrella, which allows funds created in a hub such as Dublin or Luxembourg to be broadly distributed – presents a huge threat to the multi-local Eastspring model.

Heavily promoted by several regional governments around five years ago, the idea seemed to die a death when few promoters or regulators could find agreement on basic principles. But with backing from major consultancies, it seems to be enjoying a revival.

There is clearly some caution from Ms Bang when discussing this mechanism, which could potentially change the whole business approach of her group.

“Most regulators want fund managers to be licenced, as it brings efficiency to the market,” she says. “But we are already licenced in the local markets and delivering to our clients.”

While willing to discuss it, Ms Bang is, not surprisingly, keen to play down the Asian Passport development, which goes against the model she promotes. “The whole notion of an Asian passport is really not that easy in practice, especially due to the fragmented market in Asia,” she says.

There is little point in spending vast resources pursuing an “Asian passport dream”, she suggests, if effective strategies are already being delivered to clients in target markets.

“How does the Asian Passport compare to current practice?” she asks. “Will it be any better than what is currently available? From the Eastspring perspective, we already know how to deliver strategies to local clients. We like to look at individual markets, not Asia as a whole.”