Britain's Prudential Asset Management plans to build an offshore product range for its retail mutual fund investors around the Asia Pacific, says Ajay Srinivasan, managing director of fund management in Hong Kong.
Unlike many foreign names which set up hubs to provide offshore products before dipping a toe into domestic waters, Prudential fancies itself a domestic player across the region that is now looking to provide international exposure to retail clients.
The firm has just established a division in Singapore to coordinate this effort led by Suraj Mishra, who previously led the regional product development team. The work involves selecting what funds from Prudential's UK affiliate fund house MNG to provide to Asian clients and register them in the various markets as regulations permit. The firm wants to be able to begin promoting offshore funds by the end of the year.
"This will change the way we do business," Srinivasan says. "It diversifies the customer's risk, provides more products for our distributors, and gives us products that we can sell across markets."
As the global offering platform is established, Prudential will need to set up a support team to service retail investors, although Srinivasan didn't detail what kind of staffing needs he expects.
Prudential Asset Management is strictly a retail house in Asia, although it also manages assets on behalf of its life insurance parent. "We are looking at retail savings, both for our protection and life insurance policies as well as for mutual funds and investment-linked products," Srinivasan says.
The firm manages nearly $15 billion in the region, with businesses in India, Hong Kong, Taiwan, Singapore, Malaysia, Korea and Japan. It started business in India in 1998, hiring Srinivasan from Threadneedle's domestic JV to get started, and that is now India's biggest mutual fund business after Unit Trust of India. In 2000, it acquired Taiwan's Core Pacific funds arm. That unit now goes under the name PCA, as it does in Japan, where Prudential of the United States has the right to the Pru name. In Hong Kong it operates via a joint venture with Bank of China International, a business that is one of the top-five MPF providers. Srinivasan moved to Hong Kong in 2001 to oversee the region.
The firm maintains local offices in all these markets for sales, marketing and managing locally invested money, while a team in Hong Kong runs regional equities and another in Singapore handles fixed income. Some back office and product development work is also centralized in Singapore.
The missing piece is China, where the firm sees retail opportunities aplenty. The life insurance company has a JV with CITIC Group, CITIC Prudential, which has offices in Beijing and Guangzhou. Srinivasan wants to leverage off that to create a mutual funds joint venture, and his Taiwan lieutenant, Thomas Tsao, is charged with finding opportunities this year.
[BoCI/Pru had originally hoped to form a JV with Bank of China International Holdings, according to BoCI officials, but it tied up with Merrill Lynch Investment Managers instead.]
Prudential is driven by the huge amounts of retail holdings of savings deposits, in excess of 50% across the region and in markets such as China, above 80%. Optimism is leading savers in markets like Hong Kong and Taiwan to shift into balanced funds, with up to 30% in equities. With defined contribution systems implemented in Japan and maybe introduced to Korea, Singapore and India, there are more opportunities to use tax breaks to encourage investment, while variable annuities are proving popular in Japan. Distributors still need to develop a financial planning culture, however.
"I hope in five years, there will be no more than 50% of household savings in bank deposits," Srinivasan says. "But we are a long way from seeing truly balanced portfolios like you see in the United States."