Hewitt Associates has acquired Woodrow Milliman China, a boutique consultancy mainly owned by principals Stuart Leckie and Allen Wu, to position itself to dominate investment consulting for mainland pension funds in the future.
Leckie, an ubiquitous Scot who formerly chaired Fidelity Investments for the Asia-Pacific region, and Wu, a Canadian Chinese who was a senior executive at Manulife, have spent the past three years researching the Chinese pension system. "We were doing quite well in our own small way," says Leckie. "But with China's joining the World Trade Organization and its pension reforms, it was going to be hard for us to make a really big impact. We needed to be with a big name that could provide human resources and financial resources."
Leckie will continue to run Stirling Finance, his own advisory company. (Full disclosure: he has also advised PensionsAsia magazine.)
For Hewitt and its new employees, the advantages to the first mover in investment consulting in Asia are clear. Watson Wyatt was the first to market itself aggressively in Hong Kong and Singapore, and today investment managers say it gets around 75% of pension fund investment consulting mandates. William M Mercer has a similar lock on Australia. Frank Russell won the first government pension fund mandate in Japan and went on to play an uncontested gatekeeper role for most of Japan's biggest funds, a role now being challenged in part because the firm's emphasis is shifting toward marketing its own products instead. The lesson in investment consulting seems to be: get in early and get in big.
China for the moment remains closed. Its pension system is unfunded, and what monies exist are heavily regulated and not allowed offshore. But the situation is evolving rapidly. Already institutions such as insurance companies are looking to outsource to local fund managers, while the mutual funds industry is seeing its first open-ended funds. State-owned enterprises and new central government pension funds are expected to outsource soon. Offshore investment is still some way off, but no longer a distant dream. China could easily become the region's second-biggest market in five to 10 years.
In the meantime, Leckie says Hewitt has many human resources relationships with multinationals in China that make a starting point for pension consulting work. "Hewitt is the second-largest benefits consultant in the world," he says. His work in Hong Kong is likely to play second fiddle, he says with regret, but notes the opportunities on the mainland are too demanding to do both. Hewitt's main challenge will be hiring enough qualified people to keep up with the work, he predicts.
Woodrow Milliman China was founded three years ago by Leckie and Wu as a joint venture between two consultancies, Bacon & Woodrow in the United Kingdom and Milliman & Robertson in the United States. Leckie and Wu later acquired most of the company. Last year, Bacon & Woodrow itself was acquired by Hewitt. Leckie says Hewitt, although it has an HR presence already in China, with offices in Beijing and Shanghai, it needed to fill in the investment consulting piece for pension funds and insurance companies.