First State targets build-out in Asian fixed income

First State Investments is busy building its Asian fixed-income capabilities as part of an organic growth strategy for the region and is in the process of bulking up its team.

The international arm of Colonial First State Asset Management, the wholly owned subsidiary of Commonwealth Bank of Australia, manages $37 billion in emerging market and Asia ex-Japan equities.

Its international business was born out of a Colonial acquisition in 2000 of boutique Stewart Ivory in Scotland, which had about £3 billion in assets under management. It closed a number of strategies but kept the Asia ex-Japan and global emerging market component, which now forms the cornerstone of its international operations.

First State now manages $2 billion in Asian fixed income, headed by Murray Collis. AsianInvestor.net can confirm that Nigel Foo has joined the team in Hong Kong. He came from State Street Global Advisors in Singapore, where he gained experience managing a large Asian bond fund.

Michael Stapleton, First State’s regional managing director for Asia and Japan, confirms that Collis has been engaged in a recruitment process and that further announcements can be expected in the next few weeks.

“We have identified it [Asian fixed income] as a segment where we expect to see quite significant growth in terms of investor interest,” he says. “We have been thinking about product development and the types of new strategies that we can launch.”

He believes there is plenty of talent available for hire in Asia’s asset management industry. “Recruitment has definitely slowed down inside the big organisations and I don’t think compensation is what it was a number of years ago,” he adds.

“Plus it is tough for boutiques to set up here in Asia. Distribution is very competitive, there are a collection of countries that you are selling to and the cost of getting off the ground is significant.

“In Europe and Australia there is a fight for talent among the boutiques as much as the big houses, whereas in Asia it is just among the big houses.

“So we will be actively searching for talented investors and teams of investors over the course of the next year in Europe and Asia and you will see us add capability.”

Just last week First State announced it had opened a representative office in Tokyo, naming Hiroyuki Aikawa as office representative and director of institutional business.

It has built its Japanese business to manage about $4 billion, flying its Sydney-based sales team of five Japanese nationals in and out of the country, according to Stapleton.

But now it has an on-the-ground presence and will be looking to deepen its client base. Stapleton says that becoming a fully fledged fund manager in Japan is a multi-step process, which is likely to take several years, and that a representative office is just the first step.

“Japan is a market that had grown quicker for us than the others and where we were comfortable that we had a base to grow,” he explains. “Hopefully over time that will happen in other markets as well.”

First State manages about $18 billion for Asian investors outside of Australia and has offices in Hong Kong, Singapore and Jakarta, as well as Japan. Stapleton says the firm is eager to grow in Japan, Korea, Taiwan and China, where it has joint-venture First State Cinda operating out of Shenzhen and Beijing.

Globally First State has almost 1,300 staff, including just over 1,000 in Australia and New Zealand, 170 in Europe and 113 in Asia including Japan.

The appointment of Mark Lazberger from State Street Global Advisors two years ago is seen as key in terms of the development of its Asia-focused business.

First State is 100% owned by Commonwealth Bank of Australia (CBA) and while Stapleton refuses to rule out the possibility of an acquisition backed by CBA, he says the firm is focused on organic growth.

Certainly it has made a number of appointments over the past year in its global resources, infrastructure and property teams, and now it is seeking to populate similar teams in Asia.

In June, Richard Jones was named senior analyst for the Asia-Pacific ex-Japan global emerging markets team; Jin Xu was appointed senior analyst within the global infrastructure securities team; and Louisa Fok was named senior analyst with the global property securities team.

Last month Colonial First State also announced hires to its global resources team, namely Mark Hume as senior energy analyst, Rebecca O’Dwyer as senior mining analyst and Rupert Cole as team investment manager.