BNP Paribas Asset Management (BNP Paribas AM) is looking to expand in the region, its Asia Pacific CEO Mike Nikou (pictured) told FSA in an interview, even as most pure-play asset managers have announced savage cuts in recent months.
“We continue to hire people. Even in the last couple of years in challenging markets we’ve continued to hire,” he said.
“We’ve hired in the institutional space, that’s our core business, but bringing in specialists in the wholesale space as well in Hong Kong, in Singapore and some other markets. That’s not just on the sales and marketing side, but even investment specialists.”
Cuts elsewhere
Nikou’s comments come during a challenging market backdrop for many asset managers, who are being squeezed by multi-year trends such as the growth in passive investing but are also facing more recent headwinds, notably attractive yields on cash products.
Many of the mid-sized firms such as abrdn and Baillie Gifford have responded by slashing headcount, although even the larger firms such as BlackRock and Fidelity have not been immune from cuts and have announced sweeping restructuring plans.
Conversely, BNP Paribas AM is on a bit of a firmer footing compared with a lot of the pure-play firms. Its assets under management (AUM) last year even rose, up 5.5% globally to €1.24trn ($1.36trn), albeit this was mostly driven by inflows into money market funds.
Wholesale space
Despite this firmer footing, Nikou concedes that while the firm has had a strong track record catering to the more sophisticated investors such as central banks and sovereign wealth funds, it has not punched its weight when it comes to wholesale distribution, which is something the firm is seeking to rectify.
“Our business historically has been focused on the institutional segment and a smaller piece has been distribution to financial institutions, but it is an area where we’re expanding,” he said.
“We have a goal in the region but even globally to really prioritise building out that business to have a more well-diversified business model.”
He noted that wholesale distribution remained competitive and while the firm was planning to add to its headcount in this area, it was also important to ensure that other key parts of the firm’s offering were up to standard including having the right products and right marketing.
“Nowadays, it’s not enough to just provide a product to a distributor and ask them to go out and recommend those to their clients. It’s really about having a unique partnership concept, education on products,” he said.
“It’s about customising investment solutions for specific partners. So, instead of taking products off the shelf, you’re actually sitting down and trying to understand where the clients are coming from and if we don’t have the solution on the shelf, we’re customising bespoke solutions for these clients.”
Regional footprint
BNP Paribas AM overall has close to €100bn in AUM in the region including its partnerships. It has a presence in nine markets: Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore and Taiwan.
In some of those markets, the firm has only sales and marketing, although in other markets they also have an investment presence. The mix of business in different markets is often surprising though, for example BNP Paribas AM has no investment teams in Australia and Japan, but they do have a presence on the investment side in Indonesia, Malaysia and Taiwan. In Jakarta alone, BNP Paribas AM has 70 people there.
In terms of which markets the firm is seeking to expand into, Nikou singles out Australia and Japan as two markets that are particularly enticing given that they are the two most developed markets in the region.
He also refuses to rule out expanding into different markets altogether, notably Korea and some of the smaller markets in southeast Asia.
“In Korea, we have a strong business where from time to time we look at to see if it’s beneficial to have people on the ground. We’re always looking at southeast Asia. There’s high GDP growth. It’s all relatively early, but I think the Philippines and Vietnam at some point could be very interesting,” he said.
China plans
The big play for a lot of asset managers ever since regulators scrapped the foreign ownership cap in 2020 has been China.
In 2021, BlackRock became the first asset manager to be given a licence to operate a wholly owned mutual fund business in China by the regulator. After a respite in approvals, several other asset managers have since followed BlackRock’s lead including Neuberger Berman and Fidelity.
So far it has not been smooth sailing for most foreign asset managers. BlackRock, for example, raised only Rmb573m ($79.7m) for its second onshore fund versus Rmb6.68bn for its first. Vanguard scrapped plans altogether for a mutual fund unit, citing a “crowded” market.
China’s mutual fund industry remains fiercely competitive with around 120 local asset managers operating there, many of whom have established track records and strong brand awareness among domestic investors making them hard to dislodge.
BNP Paribas AM is unusual in that it is taking a three-pronged approach to cracking China. The firm has a longstanding minority stake in Shanghai-based HFT Investment Management.
In addition, the firm also launched a majority-owned wealth management joint venture (JV) with ABC WM, a unit of Agricultural Bank of China, at the end of last year. The new JV has launched four pure fixed-income close ended products thus far with a total subscription amount of Rmb6.5bn .
Finally, BNP Paribas AM has also filed with the Chinese authorities to set up a securities unit, which is set to include an asset management business.
Nikou argues that the size of the market justifies this three-pronged approach and despite a number of headwinds facing both the country’s mutual fund industry and offshore players looking to expand there, he is sanguine about the long-term opportunities.
“China is super competitive. You have very, very strong domestic players. You have very, very strong global and international fund managers who have put their flag in the ground for China. So, it’s extremely competitive,” he said.
“But on the mid to long-term, we think with the products that we have, with the partnerships that we have, that we’re well positioned to compete with our global peers but even the domestic parents.”
