Things are afoot at Zurich Scudder Investments.
The firm has recently upgraded its offices in Hong Kong at One Exchange Square, which now boast a sweeping harbour view. The change of address seems to match the promotion given to Anthony Moody, who is now the firm’s regional managing director, including Japan and Australia. He also now sits on the the investment committee board.
“From the end of 2000 we began to regionalize as part of a new strategy to help the firm become more local, and to bring decision-making to regional and local entities,” he explains. The decentralization particularly applies to support areas such as the legal department, finance, human resources and information technology.
As a result, the firm is in the hunt for a regional chief investment officer. It maintains fund managers in Sydney, Singapore and Tokyo and is about to place managers in Seoul. Moody says the firm is open about where to base a CIO. “The CIO can decide,” he says. Hong Kong is the firm’s marketing, sales and service hub. Some trading is done in Sydney but most is executed in New York.
The firm is re-energizing its Asian effort. Moody says: “In recent history, Asia has boasted the highest growth rates in the world and this is likely to continue. As a firm we want to get our share of that.” He is careful to refer to Asia as “an opportunity as opposed to a regional business”. Unlike North America or Europe, Asia does not represent a unified market. Each market is so different that this requires the firm have a presence everywhere – one reason for a degree of decentralization.
Japan is the firm’s oldest market in the region; Zurich Scudder has been there for 16 years as an institutional player. It has recently launched a retail initiative and is now marketing a domestic equities fund via Nomura Securities, and is in talks with other potential distributors. The office has mushroomed over two years from 35 to 85 people, reflecting a growing interest from the firm’s global clientele. Moody also cites the growing phenomenon of independent financial advisory firms in Japan as generating interest in investment products.
One area Zurich Scudder will avoid is direct distribution. Throughout the world it relies on third-party distributors. “Our core competence is active asset management,” he says.
But what is of interest are alternative investments. Moody says the firm is considering offering such products at a global level. “We have the competence to do it in-house,” he says. It has not been decided at what level such products can be managed or distributed, but Moody says demand in Asia is growing, particularly in Singapore, where the firm will celebrate the first anniversary of its office there in August. “There is a sea change taking place in consumer demand for absolute returns,” he says.
In Korea the firm is one of a handful of foreign fund managers licensed to offer mutual funds. Moody says Korean public pension funds – and to a lesser degree private-sector ones – are increasingly emphasizing asset allocation. Furthermore, the government now realizes it can not make pension fund returns solely reliant upon the domestic equities markets.
The firm is waiting for Taiwanese regulators to register Zurich Scudder funds for the first time. Affiliate Zurich Insurance has a securities investment trust enterprise (SITE) license which can distribute Zurich Scudder funds once they are approved. The registration process began last year and timing is completely in the hands of the regulators, so Moody can not estimate when that business will take off.
Zurich Scudder would like to enter a relationship with a Chinese fund manager or securities company, but is wary of getting into something it does not fully understand. “It is not difficult to find a partner in China but I don’t have an answer as to how feasible it is to have a real business plan,” Moody explains. “Other people have rushed in, put their capital at risk and established a partnership but lack a real business plan. They just call it ‘strategic’ or a ‘commitment’. To me it has to work to an outcome. I think it is hollow criticism to say we are not committed just because we have not done this.”
