blog

Going Global...Where to Start?

by Lindsay

As asset managers look to expand into global markets, the natural question is: Where do we start? With global internet usage growing rapidly, particularly in developing markets, the Web is the most scalable resource for firms looking to promote their brand, products, and services to retail investors overseas. To take advantage of this scalability, many asset managers have begun building out global Web presences to showcase their global reach and local knowledge.

Curious to see what was out there, kasina scoured upwards of 1000 sites and was underwhelmed, to say the least. Not to be discouraged, we set out to identify those firms whose holistic global presences were ahead of the pack across a variety of criteria. The result of this effort is our first annual Top 10 Global Retail Asset Management Web sites.

Writing this report gave us a new respect for the effort that goes into building and maintaining a global Web presence: accurately translating content into countless languages as not to deter local users, conforming to local cultural norms without compromising the global brand, trying to leverage content across countries with different products and distribution channels... the list goes on.

While the 10 firms on our list are doing at least a few of these things better than their competitors, there is a huge opportunity for other firms to match or surpass current offerings. Particularly in developing markets, existing Web sites for retail investors contain fairly sparse, static content and offer little in the way of advanced functionality or servicing capabilities

We expect this to change, and change quickly, in coming years, as the competition in global markets heats up and firms begin to push the envelope with more innovative design, robust content, and sophisticated functionality. We're excited to discuss what it takes to build a great global Web presence and how firms can join the ranks of next year's Top 10. Drop me a line if you would like to find out more!

Can Asset Managers Buy Their Way Into International Expansion?

by Corianna

Expansion in the retail banking industry and the asset management industry depend on the presence of the same conditions:

• An untapped or developing market
• The establishment of a regulatory environment
• A robust financial infrastructure

And, already, the local action is heating up in the banking sector. Take China's banking sector, for example. Firms like HSBC, Bank of America, Citigroup, RBS, and Newbridge Capital Ltd. have been buying up shares of Chinese banks.

Meanwhile, in the US, fund companies are becoming cheaper. According to a Bloomberg article two weeks ago, the valuation of asset management firms has dropped by over 35% since the second quarter of 2003. And, should Lehman, Wachovia, and National City Corp follow through on their threats to put their asset management businesses up for sale, the price of asset managers will probably drop even more.

What does this mean? Well, there's a silver lining to every cloud (or so I've been told) and it's looking like a buyers market for domestic asset managers. On September 8th Fund Action reported that Fifth Third Bancorp is selling its municipal bond funds to Federated Investors. Allianz is also apparently on the prowl for new acquisitions. If the trend spreads overseas, a golden opportunity may be taking form for asset managers looking to follow in the footsteps of internationally expanding retail banks.

Many firms with an appetite for international expansion are focusing their efforts on taking their own home-grown brands and products abroad. These firms should also keep a look out for:

• International acquisitions and investment opportunities
• Domestic acquisitions of brands or products particularly well suited for international markets

After all, the early bird always gets the worm; or so I've been told.

Do-who? Doha.

by Tricia

The Doha talks collapsed last week when India and China refused to buckle under US demands that they lower tariffs on manufactured goods in return for more favorable agricultural policies. The story didn't get a lot of play in American households -- let's face it, how much does the average American need to know about Doha? -- but to me, the point was less the specifics of the trade disagreement than the fact that India and China were willing and able to flex their growing global muscle in an international forum.

It feels like it was a particularly rough week for once flagship American businesses -- if the ongoing mortgage crisis and the again-record-setting-low-profits for GM and Ford weren't bad enough, US Airways announced today that they'd stop giving out water on their flights -- they're going to charge for it, bottled or not. This was the final straw in moving my focus off US businesses and onto a more global landscape.

I've developed a four-pronged strategy for fighting off total despondency over the American economy.

The first thing is, I'm turning my attention to my new favorite sector, emerging markets infrastructure. I've always been fascinated by things that make other things go, to put it simply, and the ongoing urbanization boom in the developing world calls for some $22 trillion dollars in infrastructure spending in the next decade -- transportation, logistics, communication, and materials.

Second, I'm coming up with imaginative scenarios as to how the need for this investment will dovetail (and it will) with the $10 trillion or so in sovereign wealth funds looking for a place to grow.

Third, I concentrate on global trade numbers and capital flows to remind me that the world is a complex, vibrant place full of interesting and surprising opportunities: Global trade volume is up from $8 trillion just five years ago to $14 trillion this year. UNCTAD says FDI is up 25% since 2002. As long as these trends continue, there's velocity and momentum in global finance.

Fourth, and my personal favorite, I've declared a moratorium on the front pages. Now I just skip straight to the Sports section, where the Yankees are still in the fight. How long is the moratorium going on for? Check back in October.

Funds Cannot Get Sued Over Sudan

by Steven

The investment situation in Darfur illustrates why it's good business for mutual funds to be more socially conscious.

When I go to the grocery store, I look for three things: quality of produce (taste and health benefits), cost, and the environmental impact of the produce.

Should fund firms let social awareness determine which companies they work with, or should they just focus on getting the maximum return for their investors?

A recent SEC ruling provides a "Safe Harbor" for mutual funds that divest from Sudan. This ruling provides certain legal protections to funds that divest from companies (PetroChina, Sinopec, India's Oil and Natural Gas Corporation Ltd., Petronas, Schlumberger, and Tatneft) doing business with the Sudanese government. Under these legal protections, the fund firms cannot be sued for making investment decisions based on divestment criteria.

Divesting in companies that do business with the Sudanese government is a choice--there are other, alternative, socially responsible funds companies can select instead.

Additionally, it's simply good business to avoid companies that engage in "bad" corporate citizenship. Engaging with the Sudanese government, for example, puts companies at risk. Not only are they risking exposure to negative public opinion, but they are also linking themselves to a highly unstable government.

Consumers are very powerful, and their demand has made organic products a huge category within stores. Similarly, investors, specifically institutional investors, are becoming more socially aware. No doubt, we will see more fund managers adopt some of the social screens that the SRI sector has utilized for years.

Update: Santander Posts 4.73 Billion Euro Profit for 1H2008

by Tricia

Yesterday, Santander's first half results went out over European wires, showing a net profit of 4.73 billion euros (about US$ 7.5 billion). A moderate decline in its domestic market was offset by double-digit growth abroad, in the UK and Latin America, and the sale of its holdings in two European commercial banks, Intesa Sanpaolo of Italy and BPI Portgual. Santander seems also to have navigated around the global credit snafu that is afflicting many of its global peer group -- owing to a pretty stringent regulatory environment and conservative lending policies.

I admire Santander as a case study in how to make money abroad when your home market is slowing down. Profits are up 20% in both the UK and Latin America, to 485 million pounds and 2.17 billion, respectively. Santander, to my mind, has been exceptionally sure-footed in its global expansion strategy, shedding as efficiently as it acquires to streamline growth around its core strengths. It has been absolutely fearless in penetrating Latin American financial services, where the national infrastructures and regulatory environments are still developing.

The numbers support an emerging view that the bank is positioning itself to command top dollar for Santander Asset Management, and raising a little money for another purchase abroad -- but let's wait and see. I also thought the Yankees were gonna win last night.

Mirror, Mirror on the Wall: Self-Reflect Before Going Global

by Corianna

Are you an asset manager looking to break into a foreign market? If so, I suggest that rather than simply going after hot markets, or basing operations in regions where you already have pre-existing investments you take a good long look in the mirror. Ask yourself, does your brand or areas of expertise make you particularly well suited to serve a particular region?

In follow-up conversations after the Future of Distribution study we have begun to see some patterns emerging amongst our clients who are pursuing international expansion.

One common approach is:

• Step 1: Push to the EU through the institutional channel.
• Step 2: Layer on retail in Europe and push institutional eastward through Middle East.
• Step 3: Arriving in Japan.

Granted, to the extent that questions of market entry are about market size, international compliance rules and savings, all firms will come up with similar answers--access to data, government regulatory information, an excel document, and some simple equations are all that's needed to figure out which regions will be most friendly to asset managers in general.

However this does not mean that all asset managers should pursue the same markets. Rather than following the herd, why not pay attention to what makes your firm unique? Perhaps you are a company whose brand hinges on reliability and low-cost. Maybe your best bet is to start in Japan, where investors are particularly risk-averse, and go to Europe later. By focusing on what makes you different you may be able to throw the conventional expansion model on its head, and carve out your own unique empire.

The Santander Reconquista

by Tricia

I am keeping a very close eye on Banco Santander's decision to sell off its perfectly healthy asset management business.

Whoever buys Santander Asset Management will inherit a profitable business and a sure foothold in a truly global business. Santander is rumored to be talking to US firms that could design products for them -- very specifically dollar funds for the Latin American market (Santander retail banks, along with BBVA, led what we call the "Reconquista" of Latin America following the liberalization of financial services circa 1999, and retain dominance in the key markets). Banco Santander would likely retain control of distribution through its retail branches. I've heard Franklin Templeton, State Street, and JP Morgan, but I wouldn't want to spread any rumors.

Santander, based in Spain, is Europe's biggest bank by market capitalization. Its balance sheets remain quite healthy despite a recent slowdown in the Spanish economy following about ten solid boom years. I've heard valuations between 2.5-3 billion euros.

Also earlier this month, Santander bought Alliance and Leicester to round out is purchase of Abbey National in 2004. (I've always thought of this as revenge for the defeat of the Spanish Armada). Analysts are wondering if the sell-off signals intent to buy another retail bank, strengthening Santander's core business. I can't wait to find out who the lucky suitor will be.