DBS Group may sell or merge asset-management business

Oct 5, 2010

The $20 billion DBS Asset Management business is reportedly in play as a means of creating a bigger regional fund-management company.

DBS Group is said by several sources to be in advanced discussions to sell its fund-management arm or merge it with a strategic partner.

There are apparently at least two firms in serious talks regarding DBS Asset Management, including Tokyo-based Nikko Asset Management and an unnamed European fund manager.

DBS Asset Management requires a substantial boost in scale from its current assets under management of S$26 billion ($19.8 billion) if it is to compete successfully against global firms as a truly regional player.

A DBS Group spokesman tells AsianInvestor: "Asia is creating wealth faster than anywhere else in the world. Against this backdrop, as stated in DBS's strategic roadmap, a key priority is to build a leading regional wealth management franchise. In line with this, DBS is exploring various options, including a possible strategic partnership for its asset-management arm, to enable the business to better intermediate burgeoning wealth flows in Asia."

A DBS insider declined to comment on particulars, but said that for a Tokyo-based asset manager, expanding into regional Asia through a technology and intellectual-property partner could prove a useful move.

Nikko AM executives declined to comment.

But the Japanese firm has indicated it is interested in promoting itself as an independent Asian asset-management company. Today around 15% of its $125 billion of AUM comes from outside Japan, chiefly from Asia. It has a long-standing investment management and trading team in Singapore, as well as a minority stake in Shenzhen-based Rongtong Asset Management and a smaller deal in India. It also runs $1 billion in China A-shares.

Acquiring DBS Asset Management would give it heft in Singaporean and regional fixed income and equities, particularly in the regional retail market, as well as prized Singaporean institutional clients. It would bring Nikko AM's non-Japan sourced AUM closer to $35 billion. This could also deliver a substantial Japanese and institutional business to a merged entity, which could benefit DBS Group, if it maintains a stake. But there would be overlap in the two firms' Singapore offices.

A European firm could acquire an almost instant, credible Asian investment platform by acquiring DBS Asset Management and give DBS Group possible access to a global platform.

DBS Asset Management has also been expanding into alternative investments via partnerships. One example of this approach is its deal with Myo Capital, whereby the Hong Kong-based alternatives manager launched the Myo Capital Special Situations Fund I with a commitment of up to $150 million from DBS, and the bank's taking a minority stake in Myo.

Elsewhere in the group, DBS Private Bank has set out its stall, having hired the highly respected Tan Su-Shan from Morgan Stanley as its new head, as well as its first ever chief investment officer and chief operations officer.

The private bank is not said to be part of any discussions around DBS AM, but presumably it would benefit from the merger of DBS AM with a bigger entity, by giving it a broader sweep of products to offer its wealthy clients on a proprietary basis.