René Buehlmann, UBS Asset Management
The firm expects up to 20% of the revenues globally will come from platform services.
“We need to find a model where margins can be higher,” Buehlmann said at a recent press briefing in Hong Kong.
The revenue mix will allow the firm to compete in an environment where asset managers are facing increasing regulatory costs, as well as increasing client pressure on fees, he said. He believes that the business model is sustainable in the long-run, especially at a time when technology continues to disrupt the industry.
The decision to offer its in-house technologies to distributors in Asia-Pacific is relatively new. The platforms include fund operational and administration services, as well as an advisory platform that is used by the group’s private banking arm.
The success of the firm’s platform business will depend on whether there is real demand from clients. “But once we onboard them, it’s very sticky,” Buehlmann said.
He acknowledged that it also depends on how fast distributors are embracing technology. “Every bank is also thinking about their value proposition going forward. Some of them may build in-house capabilities, but some may probably realise it would take them years.”
A scale game
The firm has three platform services: fund management services, which does the end-to-end operational management of a fund; UBS Fondcenter, which links banks with asset managers; and UBS Partner, which is an advisory platform that relationship managers can use for their clients.
“For us it is really a scale game,” Markus Egloff, managing director and head of wholesale client coverage for Asia ex-Japan, said during the briefing. “These services we are doing anyway for our own private and retail bank, so if you have to do it anyway, let’s go scale it up.”
According to Egloff, Fondcenter enables distributors to access 350 fund providers and 55,000 funds globally and can help them with operational processes, such as collect retrocession fees and conduct suitability and product selection.
UBS Partner allows relationship managers to build portfolios based on a client’s needs and risk profile, as well as monitor portfolios on a daily basis. It makes use of the same technology used by UBS Wealth Management’s UBS Advice, according to Egloff. The group decided to bring this to market in a white-labelled version, he said, noting that the firm is targeting the biggest local players in the region.
UBS Advice was first launched in Zurich in 2013, and is now in Hong Kong, Singapore and Taiwan. Previously, it was only available to institutional investors.
Asia wholesale business
Globally, the majority of the firm’s clients are institutional investors. “We have a very institutional heritage. Close to 70% of our assets are institutional assets, which include sovereign wealth funds and pension funds,” Egloff said.
The other channel for fund distribution that the firm has relied on is its own private and retail banking operations.
“The majority of assets are still institutional, but if you look at profitability [in Asia], the wholesale business is now the most profitable business.
“It’s growing very fast, because we started from a very low base,” Egloff said, noting that the assets coming from the third-party wholesale business in Asia have exceeded revenue from UBS’ own banking operations in Asia.
Buehlmann added that out of $750bn that UBS AM manages globally, $150bn is sourced from Asia.