UBS Global AM to beef up product development

UBS Global Asset Management is looking to beef up its product development capabilities in Asia Pacific, says its new regional head, Rene Buehlmann.

In his first media interview since taking the helm at the Swiss bank’s Asian asset management business last June, Buehlmann said the unit had been too quiet and that he planned to raise its profile as one of the bank’s core divisions, alongside wealth management and investment banking.

He identified four trends in Asia that he believes will underpin industry growth in the future: a rising middle class, which he believes will require core products to build client portfolios; a need for diversification among institutions amid the low interest-rate environment; demand for outcome-orientated solutions; and China going global.

“Having the right product shelf is one of the things we are focused on,” Buehlmann told AsianInvestor. “We are investing in having the right people that not only can package our capabilities in the region, but also make sure we can customise them depending on the market.”

He noted this meant investing in staff with a sound understanding of regulatory developments and what will be required of asset management companies in the future.

Amid its growth ambitions, UBS' asset management arm has been rationalising its product shelf, reducing up to a third of fund solutions that have not achieved critical mass or requisite performance. The firm has said its strategy will become more defined in the months ahead.

UBS Global AM as an institution is present domestically in seven Asia-Pacific markets: Taiwan, Japan, Australia, Korea, China, Hong Kong and Singapore. These are the markets it believes will drive revenue growth. It covers other Asian markets from an offshore basis.

“In a world where regulatory differences are increasing across the region, you need to pick your bets,” argued Buehlmann.

He reiterated the firm’s desire to double its $150 billion in assets sourced from clients based in Asia Pacific by 2018. At present the firm has around $680 billion in AUM globally.

He said that UBS Global AM saw double-digit growth in net new money last year across client segments and regions, driven by its wholesale business and in particular its distribution to third-party intermediaries. Elsie Chan is head of its pan-Asia wholesale distribution business.

“Third-party wholesale is a bigger revenue driver than what is coming from our own wealth management business. I don’t think people are aware of that,” he added. “We want to grow our wholesale business beyond what our wealth management business stands for.”

He listed private banks as the top distribution channel for the firm's asset management business, while noting the expansion of its wholesale offering had meant it was now onboarding products with insurance firms. “This is a segment we are looking at,” he said.

Further, Buehlmann noted that UBS Wealth Management – where Buehlmann has extensive in-house experience – was exploring ways to provide systematic recommendations to clients directly.

He explained that now its asset management arm was also exploring ways to onboard products to a digital platform while making sure the right investment advice was in place. “It is in our heads but we are not fully there yet,” he said.

“We have invested in revamping our online portal for wealth management where clients can get more investment advice. Over time that will transform [distribution]. But I do not believe I can put a product on Alibaba and it will sell itself. I want to deliver performance and provide an after-sales service.”

He identified the two markets with the biggest online placement power as Japan and China, but cautioned that digital delivery was far from being a driver of AUM volumes at present.

Of the schemes UBS Global AM is looking at, he named Hong Kong-China mutual recognition, which is expected to be launched in the first quarter this year. The big question in his mind (as in everyone else’s) is over demand.

He said the firm was exploring whether to take some of its Ucits product and domicile it in Hong Kong, but noted it was awaiting details on requirements such as whether a portfolio manager would need to be supported by research on the ground to run a strategy out of the city.

“Where we feel we can meet the demand and bring our strengths as a firm, which is really global content, we will participate. But it [fund passporting] is not yet a game-changer,” said Buehlmann.

“If we go by the assumption that at some point China will have much more demand for global products, it [mutual recognition] is something we will consider. But we will need to be careful in terms of costs.”

Onshore in China UBS has both a joint venture – UBS SDIC – and a wholly foreign-owned enterprise (WFOE). Buehlmann said he was looking to strengthen collaboration with its JV in terms of bringing more international products and standards to the domestic market.

While he acknowledged that WFOEs potentially offered greater flexibility to fund houses, he said their development was dependent on regulatory change and that any discussion of WFOEs superseding JVs was still premature.

He added that UBS Global AM could also look to expand its offering of exchange-traded funds in Hong Kong, Singapore and Japan. At present it only provides a few ETFs out of Australia.

“We are looking at building up our ETF offering in select Asian markets,” he said. “This is a function of where we see flows and we have to look closely at where it will be worthwhile to complement our existing shelf. I am not sure the retail space in Asia is ready yet.”