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| Mishra : A bigger presence in the region | |
There is considerable excitement among fund managers when it comes to the Middle East. Key centres such as Dubai, Qatar, Bahrain and Abu Dhabi are demonstrating a newfound seriousness in their efforts to develop their own fund management industry with the establishment of new laws.
Suraj Mishra, CEO of Prudential Asset Management in Singapore and the United Arab Emirates (UAE), says that a year after the establishment of the group’s office in Dubai, more decisive steps are being taken to achieve a bigger presence in the region. Prudential Asset is the fund management arm of Prudential Corporation Asia, which in turn is part of Prudential plc out of the UK.
Prudential’s newest destination, he says, is Saudi Arabia following the announcement of a joint venture with Saudi Bank Aljajera to set up a takaful and asset management company. Mishra is optimistic the group will be able to replicate its success in East Asia in the region given the evolving sophistication among the Middle East investors who are now demanding different types of funds.
The fund management business in the region, he says, remains in the nascent stage and it is difficult to estimate the actual size of the market given that few funds have been launched in the market. Rather at the moment “everything is sold through offshore markets such as Luxembourg and Dublin”.
Saudi Arabia, he points out, is the biggest market in the Middle East in terms of the size of its population, which stands at around 22 million. Eventually, a considerable number of funds could be launched in Dubai given its ambition to become a financial hub and the passage of laws on collective investments.
Not everything has run smoothly for Prudential’s Dubai office though since it was opened in October last year. The operation lost its chief compliance officer six months after hiring him; he realized he was not suited to the fund management environment and wanted to go back to banking. Given the difficulty of hiring staff in Dubai, Prudential asked the Dubai Financial Service Authority to allow them to support the compliance process via Singapore.
The authorities obliged after conducting an audit and due diligence of the Singapore operation. Mishra observes that Dubai is very focussed when it comes to performing its role as a regulator but has been quite flexible when the need calls for it.
Expansion through partnerships
So far, says Mishra, Prudential has had a very smooth experience with joint ventures across the region, citing its partnerships with CITIC in China, BOCI in Hong Kong and with ICICI Bank in India in the funds business. That has helped Prudential achieve the scale and size it has reached, where the latest figures show that it now manages close to US$66 billion of assets across Asia-Pacific. Its growth across the region has been one of the phenomenal successes in the fund management business. The group’s fund management operations now extend across ten markets in the region – mainly China, Hong Kong, India, Japan, Korea, Malaysia, Singapore, Taiwan, Vietnam and the UAE.
Mishra believes that Prudential’s success stems from how it has evolved its presence in the region. Other fund managers, he says, have talked about how big they already are in Europe and in the US but Prudential’s asset management team tends to grow its business across the region in a highly deliberate and focussed manner, delivering products specifically targetted to the investment needs of the communities in the region.
“Each country in the region has its own demand and as fund managers, we need to cater to those” he notes. For example, Mishra says, the group’s fund management operation in Hong Kong has been profitable simply because it delivered the products that the market wants, targetting specifically the needs of investors mostly going into their retirement years. “With most investors already in their 60s, most of our products have been planned around that and so most of the funds that we have launched in that market have a more balanced approach providing dividend and less focus on the equities market,” he adds.
The expansion was not without its challenges but Mishra says that they have been able to overcome many of them by learning from experience. In 2001, he says, the group launched its fund management business in Singapore but the business failed to take off. “It was a difficult market. There were already many players and on top of that we could not find a distributor for our products. Our first launch was a global technology fund, and unfortunately the market for the technology sector melted post the launch of the fund.”
The biggest lesson they learned from Singapore was to avoid introducing sectoral or thematic funds when launching the business. The safe route, Mishra says, is still to go for a well diversified fund that can do well through the different investment cycles.
Mishra says Singapore is unique because it is a market with very few distributors. But since the group re-launched its fund management business in the city state in 2004, Prudential has been able to capture a significant share of the business and has caught some of the more established fund managers by surprise. It is now the fourth biggest manager in Singapore – just behind DBS Bank, UOB and Schroders. In Singapore, the group introduced to the market the Dragon Peacock fund, which invests in China and India, a product that correctly anticipated the subsequent popularity of these funds among investors. Mishra says that the fund basically leveraged the complimentary nature of the two economies – leveraging the concept of India as one of the world’s most efficient service economies and of China as a manufacturing giant. “The concept of Chindia is more tangible to investors than the BRIC concept, which puts both countries together with Brazil and Russia When people do their investments, they must also do a little bit of research,” he advises.
Mishra was one of the first employees of Prudential ICICI Asset Management in India when its began operation in 1998 after Prudential acquired JPMorgan’s stake in ICICI Mutual Fund. The success in India, he believes, was the impetus for the Hong Kong operation to launch its bid for regional expansion. Prudential already ran a sizeable insurance operation in India when the British were ruling the country but was forced out after the newly-formed Indian government nationalized all foreign-owned insurance companies and consolidated them into Life Insurance Corporation of India. When India began to relax the regulations on foreign ownership, Prudential stationed a representative in New Delhi to negotiate with the government for Prudential’s return to the market, albeit through a joint venture with ICICI Bank.
Mishra rapidly rose through the ranks and was senior vice-president and head of marketing at Prudential ICICI in July 2001 when he was transferred to Singapore to look at the opportunities across the region.
Outsourcing
Mishra says Prudential’s success owes much to a dedicated investing philosophy.The group, he says, is a highly efficient operation and aggressively outsources back office operations to competitive service providers, focussing only on its core competency i.e. fund management. In the US, he says outsourcing of back office processes was common given that the funds are large. Mishra says that given that they run funds of a certain size, they enjoy a lot of flexibility when it comes to dealing with providers. In Dubai, for instance, the bank they deal with provides the service through its Indin operation. So, says Mishra, what Prudential will be paying is the price of the service in India plus a premium to deliver the service in Dubai.
