Wang: Our investment philosophy and quality of standards are standardized

Nikko Asset Management (Nikko AM) is building a barbell investment capability that its global multi-asset team, a newly-formed specialist portfolio management team based in Singapore, can use as a leverage when manufacturing solutions for their clients.

This capability will have Nikko AM’s well-established passive investment business on one end. On the other end will be its newly-created active management business resulting from the firm’s acquisitions of external fund managers over the past three years. These acquisitions are: DBS Asset Management, Tyndall Asset Management, Trade Asia Asset Management (TAAM), and a six-member global equity team from Scottish Investment Partnership based in Edinburgh.

Asked whether Nikko AM’s expertise lies in passive or active investment, Yu Ming Wang, global head of investment and chief investment office-international of Nikko AM, says: “The answer is both. We are building a barbell investment capability firm where the multi-asset team can leverage off using the passive on one hand in certain areas and using the active in other areas to create the solutions that clients are demanding. We don’t want to be in in-between strategies as these will be replaced by passive, smart beta and other cheaper solutions.”

Wang explains that Nikko AM is a pioneer in passive investing in Japan where it has been a leader in the exchange traded funds (ETF) market. The firm also has a highly successful passive investment business in Tokyo, Singapore and London and has been growing its active investment capability on the back of its earlier acquisitions.

Wang explains that in Nikko AM’s case, active management means three things:

* First, the investment team is benchmark agnostic. Although it uses benchmarks to measure performance, the benchmark is not the central theme of the portfolio

* Second, its approach tends to be high conviction concentrated unlike index investing which involves hundreds of investment holdings in the portfolio. Nikko AM concentrates on its best ideas, making for a lower number of stocks in the portfolio

* Third, the deviation from the benchmark tends to be measurable and is quite significant

“There is a theme on how we are building our investment firm. In terms of solutions, we want to be an efficient passive provider where we can offer the lowest cost. But we also want to offer a very active investment strategy. Active is a commonly used word and a lot of people are confused by the level of activeness. There are many active managers that really closely resemble what an index does. We distinguish ourselves by being very, very active,” Wang emphasizes.

Leveraging on Nikko AM’s passive-active management capability would differentiate the firm’s global multi-asset team which was formed because of increasing demand for multi-asset investment strategies from international investors.

Led by Al Clark, a 20-year industry veteran previously head of multi-asset Asia-Pacific for Schroders Investment Management, the team has 18 members supported by a three-member investment strategy group. The team, currently overseeing US$24 billion of assets for institutional and intermediary clients, will be launching multi-asset products as well as integrated solutions for clients worldwide.

“It’s not just centralizing the resources but this is where all of our multi-asset advising will be done going forward. We have moved a very significant amount of AUM to this office. And that is a very big step for Nikko AM,” Wang says.

Nikko AM previously had multi-asset staff in separate locations. With the new move, it will strategically consolidate its resources to maximize its global multi-asset capabilities.

The firm aims to provide institutional-quality multi-asset products, solutions and customized advisory services to global clients who are increasingly allocating their assets to investment opportunities around the world while also protecting against downside risk.

“Whether you’re talking to Nikko AM in Sydney, Auckland, Tokyo, New York, or London, it is one team. All the investment teams report to me and in that way, our investment philosophy and quality of standards are standardized. So there is only one firm,” Wang stresses.

Nikko AM has brought all the asset allocation resources to the global multi-asset team. It is based in Singapore because it believes the multi-asset solutions sector will be going through tremendous growth.

“Consultants have quoted a number upwards of 30% per annum growth. We think this is where growth will come in the asset management industry but that is not being met by investment capability from the sector. And that’s the reason why we chose Singapore to be the area where we make a major statement to undertake a huge commitment in terms of resource specialization as well as AUM consolidation,” Wang says.