Business

Wednesday September 23, 2009

Smaller fund managers seek tie-up with strong foreign ones

BY DALJIT DHESI


PETALING JAYA: Smaller fund management houses in the country are scouting for tie-ups with reputable foreign fund managers in a bid to compete with larger rivals.

An official from a small fund management company, who chose to remain anonymous, said it was vital for smaller players to forge strategic alliances with quality fund managers amid the ongoing liberalisation in the domestic financial services sector.

“We are continuously scouting for foreign tie-ups as we feel one of the ways for a smaller fund manager like us to compete and enlarge our market presence is to have strategic collaboration with a reputable fund manager.

Mohamad Ayob ... ‘We hope to collaborate with BEA Union.’

“The bigger boys in this business have some form of strategic alliances with their foreign counterparts. But we will study the relevant proposal carefully before we embark on this journey. At the moment, we have not identified any foreign fund houses but will continue to search for one,’’ the official said.

Sharing similar views, Affin Fund Management Bhd chief executive officer Mohamad Ayob Abu Hassan told StarBiz that the company was now working closely with BEA Union Investment in Hong Kong although no formal tie-up had been established.

“BEA Union Investment recently obtained approval from the Hong Kong authorities to launch a regional fund and we hope to collaborate with it to possibly invest in or feed into this new fund,’’ he said during an interview.

BEA Union Investment is a 51:49 joint venture between Bank of East Asia (which is a shareholder of Affin Fund Management’s parent Affin Holdings Bhd) and Union Investment. Union Investment is the third largest fund manager in Hamburg, Germany.

According to Ayob, Affin Fund Management hopes to tap into BEA Union’s business contacts in the Middle East to have a presence there.

Likewise, he said the company would be keen to help manage their funds in Malaysia.

The strengthening of distribution channels, he added, was another key area for Affin Fund Management as it sought to be more competitive and boost its fund size.

To this end, apart from distributing funds via sister company Affin Bank, the company is looking to add more institutional unit trust agents (IUTAs) to sell its funds.

The company has two IUTAs selling its funds online and another Islamic bank distributing its products.

Affin Fund Management will also be talking to several foreign banks to sell its products, according to Ayob.

As at end-August, Affin Fund Management’s total funds stood at RM628mil from about RM78mil in 2004. The company, which has seven funds in total, hopes to increase its fund size by between 10% and 15% a year.

In the last four years (April 2006 - April 2009), the Affin Equity Fund and Affin Capital Fund had, on average, made returns of about 9% and 4% respectively.

The Dana Islamiah Affin had raked in on average in the last four years (June 2006-June 2009) annual returns of about 10% while Affin Islamic Equity Fund generated an average return of 7% from August 2007 to June 2009.

The company would be exploring the possibility of establishing agencies to distribute its products by next year in Kota Kinabalu, Penang, Johor Baru and Kuala Terengganu, Ayob said, adding that it was cheaper to set up agencies than opening new branches.

Inter-Pacific Asset Management Sdn Bhd is another small player aiming to make it big. CEO Robbin Khoo said the company’s overall strategy was based on a three-part model – build size, build performance track record and build brand.

“Our current strategic intent is to stay completely niche and to focus on selected market segments, singling out investors with special investment needs and providing solutions for them,” Khoo said.

“We will study and understand their specific requirements and offer the appropriate solutions to them. This sort of personalised approach gives us an edge over the more established players.”

Inter-Pacific, which has a fund size of about RM20mil, has four funds currently and aims to introduce two funds per year.

A spokesman from another small fund management outfit said it was talking to some foreign fund houses and hoped that some form of arrangements would materialise next year.

“We are currently talking to a few but at this stage have not identified anyone specific and hope to do so soon. This will help grow our fund size and boost our expertise and revenue stream,’’ he said.

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