Formed by a merger in 2012, Old Mutual Global Investors was little-known in Asia. Carol Wong, managing director for Asia-Pacific, is changing that. She talks to George Mitton.
In 2006, Old Mutual, a South African financial group, bought a majority stake in Skandia, a Swedish insurance and savings company.
The question of which parts of the two complex businesses should merge would occupy managers for years to come; in terms of the funds business, an important decision was to bring together two asset management entities, Skandia Investment Group and Old Mutual Asset Managers, to create a new unit, Old Mutual Global Investors (OMGI), in 2012.
As part of the Old Mutual Wealth business, OMGI hoped to combine the forces of its parent companies. But its newly coined name was little known – especially in Asia.
That was when Carol Wong entered the picture. In 2013, the former distribution executive at BNP Paribas Investment Partners was headhunted to lead OMGI’s Asian distribution efforts. Her mission was to distribute the firm’s products to private banks, institutions and other investors.
“When I told a friend about the job, she said, ‘Why go for Old Mutual?’ Asset management was developing in the region and there were lots of other opportunities,” she recalls. “But instead of joining another company and doing more or less the same job, I thought, it’s time to do something challenging again. OMGI was interesting, not a name known to the market.
I looked into it and thought it would be fun.”
Something to sell
Everyone in the game of sales needs something to sell, and Wong was encouraged to discover that OMGI had some products that could differentiate themselves from the rest of the market. The firm’s flagship strategy is a market-neutral fund that aims to deliver a return of 6% over cash with low volatility by investing in equities on a long-short basis. Wong says she feels the product stands out as there are relatively few market-neutral strategies being actively marketed in Hong Kong.
The fund is not available to everyone. Although it is structured as a Ucits and offers daily liquidity, it is regarded as a hedge fund-like product by the Hong Kong regulator.
That is not a challenge in the medium term. Like many newcomers to a market, OMGI’s first port of call was not the retail market but the private banks. Once Wong came on board, she began seeking meetings to pitch to the likes of Julius Baer, Deutsche Bank and UBS. Like many a small asset manager seeking to make its name, the strategy was to get on the lists of the private banks, begin drawing assets from the high-net-worth segment and, once a track record had been established, to seek institutional mandates and, ultimately, access the retail market.
In Asia, this strategy of prioritising private banks is perhaps especially applicable because of the good relationships wealthy people tend to maintain with their bankers.
“In this part of the world, people still tend to trust their bankers and have a total relationship with them,” says Wong.
There are challenges, of course. Wong says that Asian investors tend to be aggressive in their return requirements. “If you deliver 7%-9%, they want more,” she says. As investors seek to maximise their gains, the benefits of a low-volatility strategy are not always appreciated.
Hong Kong, in particular, is a competitive market. With scores of international asset managers managing their Asian operations from the territory, and an abundance of Asia-based businesses, the competition for assets is fierce. OMGI has raised assets from Singapore and Taiwan and has also recruited a south-east Asian head to help the firm break into countries such as Malaysia and Thailand.
These developments are promising but the difficulty, she says, is that regional expansion brings additional complexity, namely the demands of fragmented regulators. Their demands are especially tough for smaller firms to manage (big firms can typically afford larger compliance departments to handle regulatory requirements).
The regulatory requirements are especially taxing in China. Wong has hired a head of China and is currently weighing up the firm’s options for entering this tempting but daunting market. It is a market she understands well, having been responsible for mainland Chinese distribution in a previous job.
“We are not a big player and our name is not like BlackRock,” she says. “We would be more selective as well as careful to invest our resources. We are looking at options.”
Among these options are setting up a wholly foreign-owned entity (WFOE), a strategy many international asset managers have pursued. There is also the potential to raise assets using the qualified domestic limited partnership (QDLP) scheme.
Wong says the mutual recognition of funds (MRF) scheme, which allows qualifying Hong Kong-domiciled funds to be passported into mainland China, is promising, but since the scheme requires qualifying funds to have a track record of at least a year, “this needs more long-term development”.
The firm is still trying to decide on an “appropriate” China strategy, she says. In the meantime, she sees other opportunities in the region that are easier and quicker to grasp. “China is a medium to long-term thing.”
OMGI has fared well since it was formed in 2012. Since December of that year, the firm’s assets have roughly tripled to $55 billion as of the third quarter of 2017.
However, this growth has come almost exclusively from the UK and Europe. Wong admits that Asia-Pacific accounts for a small part of the overall asset base. There is plenty for her team still to do.
While that happens, the company is changing its ownership again. Old Mutual Wealth, its parent, has absorbed OMGI’s multi-asset fund range. OMGI’s chief executive, Richard Buxton, along with senior management and a private equity firm, TA Associates, have bought the remainder of the OMGI business, which they will run as an independent company.
Old Mutual Wealth says it will rebrand itself as Quilter Investors. At the time of writing, OMGI had not said whether it would change its name. There have been many twists and turns in the company’s history and now, it seems, there is another new beginning.
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