Aberdeen Asset Management will become Thailand's first 100% foreign-owned fund management company in Thailand when it buys out the majority stake in a joint venture, a deal it will announce this Friday, February 18.
The JV was originally established in 1994 by Nakornthon Bank, which was once owned by the Wanglee family and Schroder Investment Management, which had a 40% stake. The Asian financial crisis brought Nakornthon Bank to its knees and the family was forced to sell it to Standard Chartered Bank and in the process, sold another 40% stake in their fund management JV to Schroders.
Schroders, however, was beginning a retrenchment process led out of London, and with Asia on the ropes, an 80% stake in a small fund house with few prospects did not appeal, so it sold it. The Wanglee family was given rights of first refusal and sought out another foreign partner that could give the firm the necessary investment management expertise. In came Aberdeen, which took an initial 40% stake with an option to take an additional 11% after three years.
That deadline has arrived, and the Wanglee family decided to sell its entire stake rather than become a minority partner. Sources in Bangkok speculate that the Thai shareholders were uncomfortable with Aberdeen's vision for the company, which they see as too reliant on products that do not necessarily reflect the realities of investor demand. On the other hand, Aberdeen sees a growing need for the kind of expertise it is good at, such as international products delivered in a baht-denominated package.
Alan Kam, the JV's CEO and a nephew of family patriarch Suchin Wanglee, will retire. He has been involved in the company from its origins as Nakornthon-Schroders. No other departures are planned, according to Hugh Young, Aberdeen's regional CEO in Singapore.
The firm's current head of investments, Rob Penaloza, who has represented Aberdeen on the ground since it partnered with the Wanglee family, will have effective control as deputy CEO of the Thai business. "Given my age and grey hair, I'm to be called CEO," says the jocular Young. The other top officials are expected to continue and run the business through a small executive committee.
The buyout will not change the business profile very much, says Young. Aberdeen is a small player in Thailand, with around Bt19,000 ($490 million) of assets under management. But owning 100% will give it more flexibility and should streamline decision-making.
"What we'd like is to keep the business steady as she goes and build on what's there," Young says. This may include introducing more products that allow Thai investors to invest offshore in baht-denominated vehicles. The firm can also integrate more effectively with Aberdeen's Singapore platform.
Young says Aberdeen should also continue to invest money on behalf of Wanglee-controlled insurance companies, including Navakij Insurance and Thai Commercial Insurance, provided its performance remains satisfactory.
There are two other, larger foreign JVs in Thailand's mutual funds industry: the Bt70,000 ($1.8 billion) ING Funds, which is 55% owned by ING Group, and the Bt42,000 ($1 billion) Ayudhya JF Asset Management, which is 38.3% owned by JPMorgan Fleming Asset Management.
The big question this creates is whether the Wanglee family wants to continue its involvement in the mutual funds industry. Sources in Bangkok believe it does and that it sees fund management as a great long-term opportunity. That could open the door for a foreign player keen to enter the business, provided it agrees with the Wanglee vision. But the family has not actually made its plans known and given the suddenness of its exit from the JV, it may not have had time to decide a new course.