Magazine issues » Winter 2012

SPONSORED PROFILE: From local to global, and back

STEWART EdgarStewart Edgar, CEO of Asia Pacific at BNP Paribas Investment Partners, discusses the local approach that has enabled his company to build a global footprint in the region. Today there are 60 autonomous investment centres around the world providing local expertise for BNP Paribas Investment Partners, and 14 of them are located in the Asia-Pacific region. “We like the local model,” says Stewart Edgar, chief executive officer of Asia-Pacific at BNP Paribas Investment Partners. “When we sell funds to local investors, we adapt those entirely to the local regulations and requirements,” he says. “Our investment centres, however, also provide their expertise for our global client base.” The firm's joint venture partner HFT Investment Management, for example, manages Chinese equities and fixed income locally. These funds are sold under the HFT branding. BNP Paribas Investment Partners has a large qualified foreign institutional investor (QFII) quota, which is necessary to buy renminbi-denominated A-shares in China. “We were one of the early players in China,” says Edgar, “and therefore now the leading QFII manager globally”. With the slowdown in equity markets, however, many investors have turned to fixed income. “We expect the Chinese market to deepen over the next three to four years,  especially in the fixed income space,” he says. Korean equities and fixed income are managed by the Shinhan BNP Paribas Asset Management Company, a joint venture with  Shinhan Financial Group. The joint venture is the third-largest asset manager in Korea, measured by assets under management. Edgar, however, says his strategy is not about having a presence in every single country. Instead, he focuses on strengthening investment capabilities in those markets where the potential is the greatest – China, India and Indonesia. Both in Indonesia and India, BNP Paribas Investment Partners operates exclusively under its own brand. In Indonesia, it is the second-largest asset manager. Together with one other foreign asset manager and one local asset manager, the three control over half the Indonesian market. “Indonesia is an exciting market, attractive for asset managers because of its large population and growing wealth,” he says. “It is predominantly a domestic market and the current product range available is relatively narrow, but as the market develops, we hope to bring our global expertise to the market.”
In the past couple of months, several asset managers have turned to the country. “There are a number of new foreign players in Indonesia, but we feel confident with our position,” he says. Competition, not only from other global players, but increasingly also from Asian asset managers, is stepping up. While some of the largest Chinese asset managers have built subsidiaries in Hong Kong over the past couple of years, helped by various government programmes, Indian asset managers have turned to Singapore. “The leading players in India are now expanding overseas,” Edgar says. “Meanwhile, we are trying to grow locally in India. Although the Indian market is attractive, it’s one of the most challenging” BNP Paribas Investment Partners is not among the largest asset managers in India, but Edgar says he has a strategic advantage over locals “going the other way”. Edgar says: “We already have a global footprint and a distribution network, including our Luxembourg Ucits umbrella.” Building an international reputation, infrastructure and client base is challenging, Edgar says, especially for those asset managers who, unlike BNP Paribas Investment Partners, have no experience doing so. BNP Paribas Investment Partners sells its Asian expertise to European and US investors through its Luxembourg-domiciled Ucits funds. In Edgar’s view, there are two reasons for adopting a distribution strategy based on Ucits. First, investors are familiar with the brand and trust the regulation governing it. Second, it allows asset managers to amass assets in one fund, which can become economically viable and attractive to investors who prefer to invest in larger funds. “In Asia, there has been talk of an Asian passport,” Edgar says. “If this gets implemented, it would be a ‘game changer’ – but it is probably some way away. Edgar says international investors are increasingly allocating capital to the Asia-Pacific region, but Asian investors have long favoured their home market. “There is a preference among Asian investors to invest in higher growth markets,” Edgar says. “They also understand Asian countries better than the US and Europe.” Edgar predicts that Asian fixed income, which he will focus on in the near future, will eventually become an asset class of its own. Most Asian investors view it already as an asset class of its own, and Edgar says international investors are likely to follow suit. While Edgar says he sees room for expansion in the fixed income space, there are no plans to expand into passive strategies. “Our job is to provide alpha for clients,” he says. “There is clearly a place for both sets of strategies, but we do not manage money that way.” Apart from strengthening the existing fund range, Edgar says he will focus on building brand awareness and recognition, especially in Asia. The company's Investment Academy Asia, which started out in Hong Kong and has since been replicated in Singapore and Japan, was such a step. Edgar says the idea is to share investment expertise with clients, not to pitch products. The asset manager also employs external consultants to give the organisers feedback to help improve these events. Last year alone, more than 1,800 people attended 80 events in 20 locations, held in seven different languages. Edgar says he is very happy with his existing footprint in the region, adding  that continuing to satisfy the changing requirements of existing investors is the priority for him and his team. ©2012 funds global

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