Asset managers across the Asia region are increasingly seeking out partners to burnish their credentials and distribution reach to better meet the demand of asset owners for alternative assets in the region.
Manulife Investment Management (Manulife IM) and Korea-based Samsung Asset Management (Samsung AM) are the latest to do so. Today (April 9) they are announcing that they have signed a memorandum of understanding (MoU) that will see the two fund houses collaborate on products including private assets and Asian fixed income.
The partnership will give Samsung AM access to Manulife IM’s public and private markets investment capabilities in Asia and globally for its clients, as well as the Canadian fund manager's Asia fixed income capabilities. The two could also explore co-investment opportunities in the private market space.
The asset managers' partnership will initially be supported by assets from their respective life insurer parent companies, but intend to seek assets from other institutional investors. They anticipate the ongoing demand of asset owners for alternative assets and fixed income in the region will help support their new alliance.
Kim told AsianInvestor the firm would increase its private asset exposure in Asia to complement its current North American offerings. However, Manulife IM does not have any hiring or expansion plan in short term; instead three experts led by Kim will cover its Korean business duties under the partnership, together with Samsung AM’s Korea team.
As of end 2020, Manulife IM managed $117 billion private assets out of its CAD803 billion ($637 billion) asset under management in total. Samsung AM, a wholly owned subsidiary of Samsung Life Insurance, is the biggest asset manager in Korea with an asset under management of $233.4 billion.
Michael Dommermuth, head of wealth and asset management for Asia at Manulife IM, said Korea’s institutional investment market offers a major growth opportunity, as the country’s demographics continue to mature and more people save for retirement.
“The asset size of Korea institutional market was valued at $2.3 trillion at the end of 2019, at a compound annual growth rate of 7.5% since 2015,” he told AsianInvestor.
This growth has already led to a rising interest in private asset investments, offshore strategies and, increasingly, environmental, social and governance-aligned investing, and Dommermuth predicts these will continue as important means for investors to allocate their funds.
Samsung AM did not reply to AsianInvestor's emailed questions about the partnership.
ASIA’S ALTS FOCUS
That trend is not just playing out in Korea. Peter Kim, head of institutional business for Asia Pacific (ex-Japan) at Manulife IM added that the firm has witnessed a big increase in demand from regional institutional and retail investors for Asian private assets and Asian fixed income investments in recent years. Kim predicts this will continue.
According to alternative asset data provider Preqin's “Future of Alternatives 2025 AUM growth models”, Asia Pacific will be the fastest-growing region; it forecasts the compound annual growth rate of assets invested into alternatives between 2019 and 2025 will be 25.2%, ending with almost $5 trillion. Europe and North America will experience slower growth, but North America will maintain its position as the largest alternatives market.
The desire of more fund houses to build their alternative asset businesses is understandable, particularly given the rising of regional investors to find additional returns and to better diversify their portfolios following the impact of the Covid-19 pandemic and the resulting global economic slowdown.
Regional asset owners said that they would increase their private assets allocation to 11% by late 2021, potentially by shifting some cash holdings into the asset class, according to a Schroders’ report last year, which collected responses from 650 institutional investors globally. They particularly highlighted private equity (47%), private debt (27%), and infrastructure equity (24%) as key areas to add exposure to over the coming three years.
PICKING NEW PARTNERSHIPS
The decision of Manulife IM to partner with Samsung AM is not entirely surprising; the former has demonstrated a willingness to expand its capabilities into new areas by allying with experts.
On DATE 2020 Manulife IM acquired a stake in Albamen Capital Partners, a private equity infrastructure investment manager with a focus on renewable energy, data centres and other power-intensive infrastructure assets in China.
Earlier, in 2017 it partnered with China Life Insurance, to help the lifer invest its general account assets overseas. In return, the Canadian firm has been able to tap the insurer's expertise and and resources to help make investments on the mainland.