HSBC Investments to boost institutional business
Global head Mark McCombe sets out vision following departure of Asia head Blair Pickerell.
Mark McCombe, London-based CEO of the $309 billion investment businesses at HSBC Group, admits he was surprised by the sudden resignation of Blair Pickerell, who had run HSBC Investments for Asia.
But from McCombeÆs point of view, the surprise is that anyone would want to leave such a high-powered job that offered great prospects. ôWe have a world-class team and a phenomenal franchise,ö he says.
When he considers the scope of HSBC InvestmentsÆ business in Asia, he believes that, while it may be hard to find someone of PickerellÆs calibre to assume the leadership role, there should be plenty of experienced candidates interested in the job.
PickerellÆs resignation to head up a restructured Morgan Stanley Investment Management for Asia Pacific throws up a challenge to McCombe, who only took on the global investments role less than two months ago. He succeeds the well-regarded Alain Dromer, who has left the group.
McCombe has been a longstanding member of the HSBC family, which has been his employer aside from a stint at Wells Fargo Bank. But his expertise is in private banking. Before being tapped for the investments job, he ran HSBC Private BankÆs businesses in the United Kingdom and northern Europe.
McCombe inherits a business with considerable strengths. HSBCÆs culture and history puts it at home in Asia, and it is a massive player in its home market of Hong Kong as well as in Taiwan. It has substantial businesses in several other markets including Japan and a successful young operation in India. The firm has gotten its funds joint venture in China off the ground (with Shanxi Investment Trust, which lacks distribution power but offers HSBC the chance to influence management). In general, the firm sees itself as an expert in emerging markets.
Its greatest advantage is its distribution power. In most retail funds markets, HSBC is among the top foreign channels for investment products. Although in recent years it has adopted open architecture, the bank remains adept at pushing its own products.
In 2004, a year after Pickerell joined, HSBC made the decision to split retail and beta strategies from the alpha generators. People familiar with Pickerell suspect he was unhappy with this; when he joined he had been running the combined business under the moniker of HSBC Asset Management.
McCombe couldnÆt comment on why Pickerell decided to leave, but says the reason for the division still makes sense. He says the example of Sinopia Asset Management, HSBCÆs quantitative-strategies specialist, demonstrated that fund managers perform better when isolated from the distractions of a larger group. ôItÆs a rationale I fully endorse,ö McCombe says.
The decision was made, therefore, to establish HSBC Halbis Partners, which would focus on absolute-return and hedge-fund strategies. PickerellÆs HSBC Investments focused on retail and passive or enhanced products. HSBC Invesments is by far the bigger business, but itÆs not necessarily the sexy one. Ayaz Ebrahim, the former CIO for Asia at Halbis who left the firm last year for Deutsche Asset Management, is now returning as Asia CEO û which shows the attractiveness of that business.
(PickerellÆs newly created role at Morgan Stanley includes global equity, global fixed income, alternative investments including direct hedge funds and funds of hedge funds, real estate, private equity and infrastructure, for all of Asia Pacific.)
While McCombe is comfortable with the split businesses, both of which report to him, he acknowledges that the firm also has weaknesses. ôWe want to renew our focus on our capabilities for institutional investors, and to interface better with our colleagues in the corporate and investment banking divisions.ö
He would not say just how big the institutional business is versus retail, but admits it is far off the 50/50 split he would like to achieve.
ôMy vision is to marry the focus of Halbis and Sinopia to deliver good retail products and to penetrate institutional distribution,ö McCombe says. While keeping on top of the retail markets is essential, he believes the institutional market in Asia offers more growth opportunities.
There are echoes of his vision in how global competitors such as Credit Suisse and UBS are integrating asset management with their investment banks, blurring the old lines so that banks can sell structured products or leverage balance sheets for buy-side clients.
HSBCÆs investment banking business has never achieved the same punch as its major rivals, however, even in Asia, and it is not viewed as a leader in terms of derivatives.
McCombe says, however, that HSBC can use the corporate bankÆs lending and trading relationships with companies across the region to add value. ôItÆs not about the investment bank,ö he argues. ôItÆs about being close to our partners at a trading level.ö
For example, HSBC Investments is now developing cash-management solutions to help corporations with massive war chests better deploy these assets. ôWe must ensure we are seen as a strategic partner in this area,ö McCombe says.
Among the risks he sees is the fear of missing out on opportunities. Given the firmÆs broad geographic footprint, the only major Asian market where it lacks an onshore business is South Korea. McCombe says acquiring a business there is very expensive. ôIt may be better to build out an institutional business without jumping into local manufacturing,ö he says, adding the firm is still thinking about entry strategies.
In China, he says the plan is ômore of the sameö regarding a healthy retail business but looking at how the firm can do more with local institutions.
But from McCombeÆs point of view, the surprise is that anyone would want to leave such a high-powered job that offered great prospects. ôWe have a world-class team and a phenomenal franchise,ö he says.
When he considers the scope of HSBC InvestmentsÆ business in Asia, he believes that, while it may be hard to find someone of PickerellÆs calibre to assume the leadership role, there should be plenty of experienced candidates interested in the job.
PickerellÆs resignation to head up a restructured Morgan Stanley Investment Management for Asia Pacific throws up a challenge to McCombe, who only took on the global investments role less than two months ago. He succeeds the well-regarded Alain Dromer, who has left the group.
McCombe has been a longstanding member of the HSBC family, which has been his employer aside from a stint at Wells Fargo Bank. But his expertise is in private banking. Before being tapped for the investments job, he ran HSBC Private BankÆs businesses in the United Kingdom and northern Europe.
McCombe inherits a business with considerable strengths. HSBCÆs culture and history puts it at home in Asia, and it is a massive player in its home market of Hong Kong as well as in Taiwan. It has substantial businesses in several other markets including Japan and a successful young operation in India. The firm has gotten its funds joint venture in China off the ground (with Shanxi Investment Trust, which lacks distribution power but offers HSBC the chance to influence management). In general, the firm sees itself as an expert in emerging markets.
Its greatest advantage is its distribution power. In most retail funds markets, HSBC is among the top foreign channels for investment products. Although in recent years it has adopted open architecture, the bank remains adept at pushing its own products.
In 2004, a year after Pickerell joined, HSBC made the decision to split retail and beta strategies from the alpha generators. People familiar with Pickerell suspect he was unhappy with this; when he joined he had been running the combined business under the moniker of HSBC Asset Management.
McCombe couldnÆt comment on why Pickerell decided to leave, but says the reason for the division still makes sense. He says the example of Sinopia Asset Management, HSBCÆs quantitative-strategies specialist, demonstrated that fund managers perform better when isolated from the distractions of a larger group. ôItÆs a rationale I fully endorse,ö McCombe says.
The decision was made, therefore, to establish HSBC Halbis Partners, which would focus on absolute-return and hedge-fund strategies. PickerellÆs HSBC Investments focused on retail and passive or enhanced products. HSBC Invesments is by far the bigger business, but itÆs not necessarily the sexy one. Ayaz Ebrahim, the former CIO for Asia at Halbis who left the firm last year for Deutsche Asset Management, is now returning as Asia CEO û which shows the attractiveness of that business.
(PickerellÆs newly created role at Morgan Stanley includes global equity, global fixed income, alternative investments including direct hedge funds and funds of hedge funds, real estate, private equity and infrastructure, for all of Asia Pacific.)
While McCombe is comfortable with the split businesses, both of which report to him, he acknowledges that the firm also has weaknesses. ôWe want to renew our focus on our capabilities for institutional investors, and to interface better with our colleagues in the corporate and investment banking divisions.ö
He would not say just how big the institutional business is versus retail, but admits it is far off the 50/50 split he would like to achieve.
ôMy vision is to marry the focus of Halbis and Sinopia to deliver good retail products and to penetrate institutional distribution,ö McCombe says. While keeping on top of the retail markets is essential, he believes the institutional market in Asia offers more growth opportunities.
There are echoes of his vision in how global competitors such as Credit Suisse and UBS are integrating asset management with their investment banks, blurring the old lines so that banks can sell structured products or leverage balance sheets for buy-side clients.
HSBCÆs investment banking business has never achieved the same punch as its major rivals, however, even in Asia, and it is not viewed as a leader in terms of derivatives.
McCombe says, however, that HSBC can use the corporate bankÆs lending and trading relationships with companies across the region to add value. ôItÆs not about the investment bank,ö he argues. ôItÆs about being close to our partners at a trading level.ö
For example, HSBC Investments is now developing cash-management solutions to help corporations with massive war chests better deploy these assets. ôWe must ensure we are seen as a strategic partner in this area,ö McCombe says.
Among the risks he sees is the fear of missing out on opportunities. Given the firmÆs broad geographic footprint, the only major Asian market where it lacks an onshore business is South Korea. McCombe says acquiring a business there is very expensive. ôIt may be better to build out an institutional business without jumping into local manufacturing,ö he says, adding the firm is still thinking about entry strategies.
In China, he says the plan is ômore of the sameö regarding a healthy retail business but looking at how the firm can do more with local institutions.
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