Deutsche WM’s advice to fund houses

Competition in the funds industry is growing ever fiercer in Asia, as more asset managers look to expand their business in or to the region, while distributors have largely sought to reduce, rather than increase, their product ranges. This makes advice from influential gatekeepers all the more valuable. 

Asset managers face three main challenges when it comes to distribution, says Karen Tan, head of global wealth solutions for Asia Pacific ex-Japan at Deutsche Bank Wealth Management: differentiating themselves, becoming a preferred product supplier and engaging with the right team at the distributor.

Speaking at the FundForum Asia in Hong Kong this week, Tan first addressed the question of differentiation in product ideas and strategy.

She advised fund managers not to be copycats when it came to product development or they risked being left out in the cold. There is a first- and second-mover advantage, she noted, but those jumping on the bandwagon thereafter will find it hard to raise assets.

Tan said it was a challenge to distinguish between strategies across managers: “Beyond two to three managers for a specific strategy, distinguishing one from the other is virtually impossible.

“I totally understand why you want to build a product set, but from a user’s stand point it doesn’t make sense,” she noted, adding that there was a disconnection between manufacturer and user.

It does not help fund managers that Asian investors are addicted to new products, suggested Tan. “A lot of the blockbuster funds are new investment ideas. It is very hard to recycle old products or strategies.”

The second challenge for managers concerns the growing trend for distributors to sign preferred partnerships with fund houses. “So far we haven’t done that, but we are constantly debating about it,” said Tan.

She suggested that asset managers that were not in the preferred group from day one would find it hard to get on the shelf in future.

Lastly, Tan addressed the issue of how to engage with the due diligence and selection team if they don’t sit in Asia. For instance, Deutsche Bank WM’s due diligence function is in Europe, so the question arises whether to approach that team or the sales staff in Asia.

Tan said it should be a two-pronged approach, but that the fund firm must decide to be internally coordinated in terms of the type of products it wanted to market.

There have been cases where a fund firm’s European team pitches a strategy to a bank in Asia that is different from what its Asian team is pitching to the same bank.

“If there is no cooperation within the fund firm, you end up failing on both ends,” said Tan. “You need to figure out internally what you want to focus on in terms of product push and go with the multi-pronged approach, or one team has to take a back seat so it can sell one single idea first.

“The fund platform is saturated; to add a product is challenging.” she noted. Unless there is a gap in the bank’s product range, a fund manager has messed up big time or there is strong support from the sales side, there is no real desire to add products, said Tan.

Such issues were discussed by private bank gatekeepers and asset managers in AsianInvestor articles in late 2014, and a couple of years before, and the market has only gotten tougher for both sides since then.