Summer 2010

SPONSORED PROFILE: Wise mover

TRow_price_logoT. Rowe Price’s approach to entering the competitive Asian market has been measured and considered. The results are now paying off, Todd Ruppert tells Funds Europe. As the shift of power moves from East to West, penetrating the Asian markets is becoming more important for asset managers looking to grow their business. Everyone wants a piece of the Asian pie, but not everyone can get it.
Todd Ruppert, president and chief executive of T. Rowe Price Global Investment Services Limited, says T. Rowe Price has been diligent and judicious in its expansion into Asian markets and is increasingly better positioned for the developments expected within this part of the world.
The firm’s Asian distribution footprint has been growing since the firm’s joint venture with Sumitomo Mitsui Banking Corporation and Daiwa Securities in 1999. That successful joint venture, Daiwa SB Investments, is the most longstanding asset management joint venture in Japan. T. Rowe Price serves as the non-Japanese sub-adviser for products distributed through SMBC, Daiwa Securities and others. In 2004, T. Rowe Price commenced its activities in Australia and New Zealand where it works with both institutional investors and intermediaries. In 2006, T. Rowe Price was among the first managers hired by China’s National Social Security Fund, and in 2007 was appointed global investment advisor for China’s largest asset manager, China Asset Management. This year, T. Rowe Price completed its US$142.4m (€116.2m) acquisition of a 26% stake in India’s oldest and fourth largest asset manager, UTI Asset Management. It also partnered with Marbo Asset Management Group in Taiwan for its initial launch in the Taiwanese market. Marbo serves as T. Rowe Price’s master agent.
This push into Asia demonstrates the firm’s disciplined approach to growth and that it has done its homework: “We’ve always been very thoughtful and disciplined in our expansion strategy. There is a high level of conviction behind every move we make. To date, I’d say our decisions have proven to be rather sagacious.”
There are certain Asian countries and/or distribution channels that T. Rowe Price has specifically decided not to enter. Ruppert gives the Singapore and Hong Kong retail markets as examples: “In a relative sense, they are both small and most certainly are very crowded with entrenched competitors. We don’t see justifiable rationale for entering them – at least in the current context. We do, however, work with institutional investors.” He doesn’t rule out the possibility that this situation may change going forward. “It’s extremely important to continually evaluate. There may be developments that necessitate further due diligence and a possible resulting change of focus.”
But, for the moment, T. Rowe Price is content with its Asian presence and Ruppert believes the firm can take advantage of the progress in the markets it participates in. “As retail and institutional markets develop and/or expand, investors increasingly allocate assets outside their home markets. We’re well positioned to benefit from this development and can leverage off what we have already built in these regions, rather than blindly focusing on incremental geographical expansion for growth.” he says. “In India we also benefit from the growth of retail investments in Indian securities by virtue of our equity ownership. Strategic planning
“We’re not about growing for growth’s sake. When considering a new opportunity, we look at multiple factors and the impact of expansion on the entire organisation. Just as we’re thoughtful about what companies we invest in for our valued clients, we apply the same philosophy when considering entering new countries and/or distribution channels,” says Ruppert.
This sensible, prudent approach appears to be paying off as T. Rowe Price is garnering success with both retail and institutional investors in its Asian markets of choice.
The decision to move into Taiwan, Ruppert explains, was made when a number of factors changed, turning the country into a more attractive opportunity for T. Rowe Price. “We actually began evaluating the Taiwanese market back in 2004, but it wasn't appealing for us until now,” he says.
Flemming Madsen, director and head of the Asia Pacific region for T. Rowe Price Global Investment Services, says: “The 2004/2005 bond fund scandal was a serious setback for the Taiwanese mutual fund market plus demand for global portfolios was weak. But over the last couple of years the market has stabilised and investors have been allocating more towards global markets and therefore there is a much better fit with what we at T. Rowe Price can offer them. The same is true for the large government pension funds in Taiwan, where large international outsourcing programs are moving forward.”
The equity investment in UTI Asset Management is T. Rowe Price’s other most significant recent move into Asia.
Madsen says: “The Indian economy is attractive and the demographics are quite favourable with a relatively young population and a rapidly developing middle class. Also, the savings rate is running at 35-40% so the macro considerations line up very well for the continued fast expansion of the mutual fund market.” Mutually beneficial relationship
Ruppert explains why the firm decided to buy into a well-established company like UTI, rather than to build from scratch alone.
“By our very nature, T. Rowe Price is not an acquisitive firm, we have grown organically. That said, we acknowledge the fact that in certain situations it’s economically prudent to consider working with a partner,” he explains, “In India, given the wide distribution footprint required to be successful in the retail market long term, combined with the idiosyncrasies of retail distribution and the embryonic nature of the institutional market, it made absolutely zero economic sense for us to enter India on our own. Without the opportunity to work with a well-established, highly regarded, capable, trustworthy, market leading firm, we would not enter the market.”
Ruppert says the relationship with UTI is developing very well and is fulfilling its goal of being mutually beneficial. “UTI is gaining market share and continually improving. We're learning from them, providing them a lot of input, and the personal relationships are exceptional. I’m pleased to say we have had none of the serious growing pains usually associated with joint ventures,” he says. He attributes this to the effort put into the research before the firm embarked on the agreement. “T. Rowe Price is extremely fastidious. We do our homework – lots of homework. We worked with UTI for over a year, getting to know the people and how we would interact. Likewise, UTI did their homework. This was not a shotgun marriage; it was very well thought through well before we made the investment.” ©2010 funds global

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