Principal hires, reshuffles to boost wealth focus
US-based Principal Global Investors is the latest fund house to boost its focus on the wealth segment in Asia with a new hire and reorganisation of its sales team. The firm, which has more institutional than wholesale business outside the US, aims to grow the latter segment more aggressively, including potentially through sub-advisory.
Principal Global Investors (PGI) this week hired Suresh Singh as Asia head of fund distribution based in Singapore. He moved from BlackRock in the same city, where he built a wealth and asset management relationship team for exchange-traded funds across Hong Kong and Singapore. Singh's last day at BlackRock was February 29 and his responsibilities have been assumed by the broader iShares sales team, said a spokesperson.
Gaurav Kumar previously headed distribution for Asia and the Middle East, but will now focus the Middle East, India and Africa. He will remain in Dubai.
Kumar and Singh report to Nicholas Lyster, London-based global head of wealth advisory services, and to their respective country heads.
Growing wealth focus
Lyster’s role was established last month as part of an effort to expand the firm’s business through the wealth management channel. He was PGI's Europe chief executive for 10 years but his role is now focused on global distribution to wealth managers. “This is a business I have been involved in for some time, but now I am involved full time,” said Lyster.
Replacing him as Europe CEO is Tim Stumpff, based in London, who was previously a managing director at London-based fund-of-hedge-funds firm Liongate Capital Management. PGI reportedly bought a 55% stake in Liongate in 2013 and began closing the firm last year amid substantial investor withdrawals.
Speaking to AsianInvestor from London, Lyster said the strategy in Asia had not changed; the firm is simply putting more resources into covering private banks, independent asset managers and multi-family offices.
Other international fund houses, too, have been increasingly targeting wealth management channels in Asia, with examples in the past few years including Axa Investment Managers, BlackRock, Goldman Sachs Asset Management and T. Rowe Price. Research published last year by consultancy Casey Quirk argues that individuals rather than institutions will drive revenue growth in the region in the coming years.
Sub-advisory potential
For PGI in Europe, sub-advisory business from wealth managers is significant and a growth driver for the firm, said Lyster, and this trend is likely to follow suit in Asia if fee-based models take hold.
The growth in sub-advisory business has been driven by the move to a fee-based model away from a commission-based approach, he noted. In the UK, fund houses are not allowed to pay inducements, and the Markets in Financial Instruments Directive 2 (Mifid 2) will implement that change across Europe.
“This changes the whole relationship between asset managers and wealth managers,” he added. “If we no longer are a source of income for wealth managers, they will therefore find the lowest-cost fund.”
As a consequence, noted Lyster, there has been a shift into lower-cost – hence, passive – products such as exchange-traded funds.
But another way for wealth managers to boost margins is to create their own funds then hire a sub-adviser on an institutional fee and charge clients a higher fee, he said.
He did not see signs of moves to fee-based models in Asia yet, but expects it to happen at some point, given that it Europe and the US have made the transition. That would likely spark a similar big shift into passive products in this region.
PGI, meanwhile, has no intention of providing passive products. It has three ETFs listed in the US, but all are actively managed.
Lyster said it might list these products outside Asia over time. “The US has by far the biggest ETF market and is used commonly by advisers,” he noted. "I think we want to see a lot more proof that ETF is the vehicle of choice outside of the US before we do that."