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2010-01-24T21:47:00.000-08:00

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2008-09-25T22:26:00.000-07:00

Why is Kokusai bullish on the U.S. dollar?

The biggest bond fund in Asia said it is buying the U.S. dollar, and holds the greatest amount of the currency in 18 months, because the nation's economic instability may infect the rest of the world.

Kokusai Global Sovereign Open Fund's U.S. holdings are the highest since April 2007, Masataka Horii, one of four managers for the $51.9 billion in Tokyo, said in an interview. The fund increased its allocation to 27 percent of its assets as of the end of August, from a record low of 20 percent in March.

“The slowdown in growth will spread from the U.S.,” said Horii, 42, at Kokusai Asset Management in Tokyo. “Investors won't want to take risks. Money will go back to the dollar, especially from emerging markets.”

The dollar has fallen 3.7 percent the past two weeks against a basket comprised of six currencies of major trading partners on concern borrowing to fund a bailout of the banking sector will swell the nation's budget deficit.

Kokusai is favoring the dollar while Treasury Secretary Henry Paulson's $700 billion proposal to stabilize the banking system sends the currency lower.

Dollar Weakens
The dollar weakened the most against the euro on Sept. 22 since the European currency's 1999 debut, falling 2.1 percent. The combination of the plan proposed by Paulson, government spending and a slower economy may swell the U.S. budget deficit to $1.5 trillion, or 10 percent of GDP, said Michael Feroli, an economist at JPMorgan Chase in New York.

Investors in the Kokusai Global Sovereign Open Fund have lost 3.23 percent in September, versus a 1.75 percent decline in the Citigroup World Government Bond Index, the benchmark the company uses to gauge performance. The fund outperformed the benchmark last year, according to data compiled by Bloomberg.

Horii is also bullish because the Federal Reserve refrained from cutting interest rates this month even as markets crumbled, maintaining the extra yield that Japanese investors get for buying U.S. debt.

The target rate for overnight loans between banks is two percent in the U.S., compared with 0.5 percent in Japan. Ten-year Treasuries yield 2.30 percentage points more than Japanese securities of similar maturity, on line with the average for the past six months.

“The Fed won't cut the policy rate,” Horii said. “That will favor the U.S. dollar.”

Reducing Europe, Asia
Kokusai reduced its holdings of European and Asian debt to fund its U.S. purchases, Horii said. The company trimmed bonds in Europe to 39 percent of its portfolio from 44 percent, and in Japan to 9.5 percent from 13 percent since March.

Gross domestic product in the U.S. is likely to be 1.7 percent this year and 1.5 percent in 2009, according to the median estimate in a Bloomberg survey. For Japan, growth is forecast at one percent in 2008 and 1.15 percent next year. In the euro zone, the forecasts are 1.35 percent and one percent.

The U.S. rescue plan may help revive the world's biggest economy, leading investors to use funds borrowed in Japan in search of higher yields elsewhere, said Akira Takei, general manager for international bonds at Mizuho Asset Management in Tokyo.
“What we have seen since last week is an unwinding of the flight to quality,” said Takei, who helps oversee the equivalent of $36.9 billion at the unit of Japan's second-largest bank. “It means the yen will tend to be weaker.”

Mizuho bought dollars and sold Japan's currency at the end of last week, Takei said. The greenback may rise to 115 yen by year-end, according to Takei, who correctly forecast the rally in Treasuries last year.

Will the U.S. Treasury's proposal of a $700 billion bailout stop Kokusai from betting on the dollar?

2008-09-19T03:09:00.000-07:00

Will Sumitomo Mitsui buy Lehman assets in Japan?

Lehman Brothers Holdings is in talks to sell some Japan assets to Sumitomo Mitsui Financial Group in a bid to save its 1,300-employee operation in the country, three people familiar with the matter said.

Lehman Brothers Japan is also trying to sell assets including its equity, investment banking and real-estate businesses to Mitsubishi UFJ Financial Group and Barclays, two of the people said, declining to be identified as the discussions aren't public.

Banks worldwide are picking over Lehman's assets while headhunters target its employees, after the 158-year-old company filed for bankruptcy on Sept. 15. Sumitomo Mitsui and Mitsubishi UFJ have avoided the worst of the credit losses and writedowns that sank Lehman and Bear Stearns Cos. and forced Merrill Lynch to sell itself to Bank of America.

“Japan banks haven't been hurt as much by the subprime crisis, and their opportunities to grow revenues at home are declining,” said Naoki Fujiwara, who oversees about $720 million as chief fund manager at Tokyo-based Shinkin Asset Management. “This is a good chance to gain investment banking know-how.”

Sumitomo Mitsui, which invested 500 million pounds ($901 million) in Barclays in July, is also seeking to buy businesses from New York-based Lehman elsewhere in Asia, the people said. South Korea's financial regulator said Sept. 16 it suspended Lehman's local units.

Lehman's Asset Sales
Lehman will hire PricewaterhouseCoopers LLP as financial adviser for the sale of the unit in Japan, Lehman Brothers Japan President Akio Katsuragi told a meeting of about 100 creditors in Tokyo, according to two people who attended. PricewaterhouseCoopers' Tokyo officials were not available for immediate comment.

Sumitomo Mitsui spokeswoman Chika Togawa denied the bank is in talks to buy Lehman's local assets. Mitsubishi UFJ spokesman Takashi Takeuchi, Lehman spokeswoman Keiko Sugai and Barclays spokesman Yu Sakakibara declined to comment.

London-based Barclays agreed this week to buy Lehman's North American investment-banking unit for $1.75 billion. Private-equity firms Bain Capital LLC and Hellman & Friedman LLC are negotiating as a team to acquire Lehman's investment-management unit, according to people familiar with the discussions.

Tokyo-based Sumitomo Mitsui, which has a 40 percent stake in Daiwa Securities SMBC, is the only one of Japan's three biggest banks that lacks majority control over an investment-banking unit. The lender has reported about $910 million in losses on subprime-related investments since the start of April 2007, compared with more than $13 billion in such charges at Lehman and $52 billion at Merrill.

Japan's Biggest Bankruptcy
Sumitomo Mitsui paced gains by Japanese banks in Tokyo trading after U.S. stocks rallied the most in six years as the government considered a plan to shore up the financial system.

The lender rose 13 percent to close at 659,000 yen on the Tokyo Stock Exchange, the second-biggest gain among 84 stocks in an index tracking Japanese banks, which jumped 11 percent.

Lehman's main units in Japan filed for bankruptcy this week in the nation's biggest corporate collapse, listing about 4.7 trillion yen ($44 billion) of liabilities.

The company ranked 14th last year in underwriting Japanese stock sales and hasn't worked on any such transactions this year, according to data compiled by Bloomberg. Lehman was the ninth-biggest adviser on mergers and acquisitions in the country, advising on 13 deals, Bloomberg data shows.

Recruiters Knock
Lehman Brothers Japan President Katsuragi said this week the company wants to find a buyer and that Japanese firms are among the potential acquirers.

Discussions might fail unless Lehman is able to stem departures among its employees, the people familiar with the talks said. Recruitment firms are calling Lehman workers in Japan, trying to lure entire teams or departments, the people said.

The company's lawyers are seeking to file a revitalization plan, which will include a potential acquirer, to the Tokyo District Court by Sept. 26.

Lehman reported 12.4 billion yen of profit in Japan for the year ended March 31, up from 1.4 billion yen a year earlier. Revenue rose to 122 billion yen from 35.6 billion yen.

Brokerage commissions totaled 28.2 billion yen and trading profit was 4.3 billion yen, while Lehman earned 53.7 billion yen from fee businesses, including its merger advisory operations.

Should Sumitomo Mitsui decide not to buy out Lehman in Japan, which firm will most likely acquire it?

2008-09-11T23:04:00.000-07:00

Why have fund managers grown

more bearish on Asian equities?

Fund managers investing in Asia outside of Japan became more bearish on equities in the third quarter, with more increasing their holdings of cash and bonds, according to a HSBC Holdings survey.

The survey by HSBC of 12 investment management companies that oversee a combined $4.2 trillion in assets showed 44 percent of fund managers polled were “underweight” equities in the third quarter, compared with ten percent in the preceding three months.

The proportion of fund managers with an “overweight” allocation to bonds rose to 44 percent in the third quarter, up from 20 percent in the April to June period, the survey said.

“Investors continue to take conservative positions, moving away from volatile equity markets and finding a safe haven in bonds and cash,” said Bonnie Tse, HSBC's head of wealth management for personal financial services in the Asia Pacific.

The MSCI Asia Pacific excluding Japan Index, which tracks 642 stocks, has declined 31 percent this year, as concerns over slowing global growth and more than $500 billion in writedowns and credit losses at financial institutions hurt profits.

Investors pulled a net $50 billion from equity funds in the second quarter and put a net $15 billion into balanced funds and $11 billion into money-market funds, the HSBC survey showed.

Will investors continue to rely on cash and bonds? How would this trend affect the Asian equity market?

2008-09-04T23:39:00.000-07:00

Will Mitsui's renewed focus on property and utilities

deliver better than its hedge funds business?

Mitsui & Co., Japan's second-largest trading company, will close its New York hedge fund business as it shifts to investments including property and utilities.

Mitsui, with businesses ranging from import-export to financial services, decided to shut Mitsui & Co. Alternative Investment Corporation because it failed to meet the company's targets amid the turmoil of the global credit squeeze, Masaji Matsuoka, who is in charge of formulating funds at the firm's asset management division, said in an interview in Tokyo.

The unit was established in 2005 to mainly target institutional investors in Japan who sought to diversify their investments through hedge funds, Matsuoka said.

Tokyo-based Mitsui aims to focus on investing where it has more expertise, Matsuoka said. In June, it announced plans to raise as much as $1.2 billion for a fund to invest in infrastructure assets such as power generators, electricity and gas transmission companies, and railways.

“We're in the midst of shifting our focus to investments that match the business model of a trading company,” Matsuoka said. “We don't have any plans in the near future to pursue hedge fund investments.”

The company has raised about 20 billion yen ($188 million) for the Emerging Market Infrastructure Fund, Matsuoka said. Mitsui may also create funds to invest in agricultural businesses, emission credits and metal, he said.

Mitsui invested in London-based Climate Change Capital Group in May along with Alliance Trust, Universities Superannuation Scheme and SNS Reaal Groep NV. Climate Change Capital is a manager of funds investing in greenhouse gas credits.

Any future expansion in hedge fund investments will be made by Mitsui's Tokyo-based Japan Alternative Investment, said Matsuoka.

Global hedge funds fell 2.35 percent in July, according to Chicago-based Hedge Fund Research, raising the prospect they will suffer their first annual loss since 2002. Hedge funds have dropped an average of 3.5 percent this year, according to Hedge Fund Research. The July decline marks the fourth time in the past year that hedge funds have lost two percent or more in a month.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.

Aside from property and utilities, what could be other investment venues that are less vulnerable to the credit squeeze?

2008-08-31T23:52:00.000-07:00

Can Citic Group's cash tempt

Citic International shareholders to surrender stake?

Citic Group, China's biggest state-owned investment firm, raised its cash offer by 48 percent to HK$13.3 billion ($1.7 billion) to buy out minority shareholders in its Hong Kong unit Citic International Financial Holdings.

Citic Group will now offer one new share in affiliate China Citic Bank plus HK$2.16 in cash for every Citic International share the minority holders have, the unit said in a statement to Hong Kong's stock exchange. This values Citic International at HK$7.60 a share.

The higher offer takes into account the recent fall in China's stock market and is aimed at winning over minority shareholders into accepting its privatization proposal. Citic Group offered in June to pay Citic International holders one new Citic Bank share plus HK$1.46 in cash, valuing the Hong Kong company at HK$6.90 per share then. The value of this offer has since dropped after a 5 percent fall in Citic Bank's share price.

“Fund managers want more cash, rather than shares,” Kenny Tang, an associate director at Tung Tai Securities in Hong Kong, said before the announcement. Citic Bank's valuation is also unattractive and may face shrinking net interest margins in the current half-year, he said.

Citic Group was established in 1979 by former Chinese Vice Premier Rong Yiren to attract foreign capital, as the country began free-market reforms. It has 44 subsidiaries spanning broking and banking to oil exploration, and says the privatization is aimed at consolidating its financial operations.

Citic Bank Profit
Citic Bank, which is 62 percent owned by Citic Group, said last week profit rose 163 percent in the first half. The bank also said net interest margin, a measure of lending profitability, widened to 3.42 percent from 2.96 percent a year earlier.

Still, the company may not repeat this performance as growth may have peaked. Rival lenders including China Construction Bank and Bank of Communications this week cautioned their profit and loan growth would slow from the first-half.

Citic International last week reported a 4.6 percent decline in first-half profit to HK$1.44 billion ($184 million) as it wrote down a further HK$718 million in the value of structured investment vehicles.

Citic International, an investment holding company that owns a bank and two asset management firms in Hong Kong, also holds 15 percent of Citic Bank.

Lehman Brothers Holdings is advising Citic Group on the privatization.

Citic Group Profit
Citic Group, with 929 billion yuan of assets at the end of 2006, posted a profit of 6.1 billion yuan in 2006. Financial-related business accounted for 52 percent of the group's revenue and 40 percent of its profit. The group has four publicly-traded units on the mainland and six listed units in Hong Kong, according to its Web site.

After the privatization, Citic Group's stake in Citic International will rise to 70 percent, while that of Banco Bilbao Vizcaya Argentaria SA will double to almost 30 percent, according to the June statement.

BBVA, as Spain's second-biggest bank is also known, said June 3 it will spend 800 million euros ($1.24 billion) to double its stakes in Citic International and Citic Bank once the privatization is completed. The Spanish bank will own 10.1 percent of Citic Bank after the deal.

Will privatization minimize future losses and lead to a more integrated Citic Group?

2008-08-21T21:01:00.000-07:00

Will Temasek's ventures overseas

prove profitable in the long run?

Temasek Holdings, the biggest shareholder of Merrill Lynch, said it wants to lift its stake in the U.S. securities firm as it expects the investment will boost the value of its portfolio in the “long term.”

Temasek, Singapore's state-owned investment company, paid $5 billion for a Merrill stake in December, and said last month it's committing a further $900 million. Temasek's assets rose 13 percent to S$185 billion ($131 billion) in the year ended March from S$164 billion a year earlier, Chairman S. Dhanabalan said.

“If there's an opportunity, we would like to look at it,” Dhanabalan said. “Whether we do it depends on our assessment and risk diversification.”

Merrill's shares have fallen 55 percent since Dec. 24, when the third-biggest U.S. securities firm first announced Temasek's investment. Temasek is seeking to raise its overseas investments to diversify beyond Singapore, where it already controls six of the city's ten biggest publicly traded companies by market value.

Temasek's agreement to put money into Merrill last month came after the Singapore fund manager got compensated for its initial investment. Temasek said it will use a $2.5 billion so-called reset payment for losses from its earlier purchase toward buying $3.4 billion of Merrill stock. Merrill said at the time it will book the reset as an expense, as well as $5.7 billion of additional writedowns.

The purchase would push Temasek's stake beyond the ten percent limit for foreign investors. A portion of its new stock requires regulatory approval, Temasek said.

'Long-Term Investor'
“We're a long-term investor and we're not a conventional investor in the public markets,” Dhanabalan said. “We ride out the ups and downs of the market. But we certainly look at what the returns of the public markets are.”

Temasek, which took over state assets such as shipyards and an airline three decades ago, posted an average 18 percent annual return since its inception, he said. Its biggest investments in the city-state include Singapore Telecommunications, Southeast Asia's biggest phone company, and DBS Group Holdings, the region's largest bank by assets.

“One has to believe in investing in the longer term, whether locally or globally,” said Tan Teng Boo, who helps oversee about $250 million at Capital Dynamics Asset Management in Kuala Lumpur. “The pessimism driving the Western financial institutions down is so extreme right now that for longer term investors like Temasek it does make sense to get some exposure.”

Sovereign wealth funds make up two percent of the world's stock and bond markets, Dhanabalan added, and investors “overestimate” them. There's also a perception these funds aren't set up just to maximize returns because of a lack of governance and transparency, he added.

Temasek is often considered Singapore's second sovereign wealth fund. Government of Singapore Investment Corporation, or GIC, manages more than $100 billion of the country's reserves.

Although Temasek has shown interest to raise its stake in Merill Lynch, will it be able to earn regulatory approval?

2008-08-15T00:46:00.000-07:00

Is Shanghai willing to loosen up

on tax and quotas to be China's equity center?

Shanghai should offer tax breaks and investment quotas if it wants to attract buyout firms away from Tianjin, Beijing and Hong Kong to become China's private equity center, firms including Bain Capital LLC and TPG Capital say.

Shanghai imposes tax rates of up to 35 percent on private equity and venture capital firms under limited partnership structures and charges 20 percent on capital gains earned by non-executive partners, according to new rules announced on August 14. In Hong Kong, capital gains are exempt from taxation and the corporate tax rate was cut to 16.5 percent in October.

“While Shanghai offers more investment opportunities, Hong Kong certainly has an advantage in tax and legal aspects,” Jonathan Zhu, a Hong Kong-based managing director at Bain, said at a seminar hosted by the Shanghai government. “It's also extremely difficult for private equity firms to raise money on the mainland.”

Foreign buyout firms such as Bain and TPG are seeking to tap China's 43.9 trillion yuan ($6.4 trillion) of deposits as well as acquisition opportunities to capitalize on economic growth that topped ten percent for ten straight quarters. With China's stock market off over 50 percent this year, many funds are seeking returns from alternative investments such as private equity.

Shanghai, home to the nation's largest stock exchange as well as markets in commodities, index futures and foreign exchanges, is playing catch up with Hong Kong to become a global financial center.

The eastern city also lags behind the capital Beijing, the country's political decision-making center, and the northern city of Tianjin, the first to allow buyout firms to set up in 2006, in developing a private equity industry.

Shanghai Needs Incentives
Fang Fenglei, a partner at Goldman Sachs Group in China who founded Hopu Investment Management in 2007, says Shanghai should lobby the central government for special quotas for foreign buyout firms, similar to the qualified foreign institutional investors program, also known as QFII, for stock investments.

Beijing-based Hopu Investment, which raised about $2.5 billion for its overseas fund, received more than $300 million from Goldman and $1 billion from Temasek, Singapore's state-owned investment company, people familiar with the plan said in April.

As part of an incentive plan, Shanghai's Pudong financial district plans to grant rebates of as much as 40 percent on personal income tax payments by senior executives of private equity firms based there, according to Yan Xu, deputy district director. It will also offer one-time cash bonuses of up to 200,000 yuan.

China is encouraging the creation of domestic private equity funds to challenge the dominance of foreign firms such as The Carlyle Group and TPG. The government has so far approved ten domestic buyout firms, Fang said.

Neil Shen, founder and managing partner of Sequoia Capital China, said he recently registered a fund in Tianjin.

Tianjin's Bohai Industry Fund was the first domestic, yuan-denominated private-equity fund set up in China. Its shareholders include Bank of China Group Investment, China Life Insurance and China's Social Security Fund.

Should Shanghai give more investment incentives, will it be able to catch up with Hong Kong?

2008-08-07T23:34:00.000-07:00

Will Dai-ichi secure more returns from hedge funds?

Dai-ichi Mutual Life Insurance, with more than 30 trillion yen ($274 billion) in assets, will invest more money with hedge funds to safeguard returns as financial markets falter.

Tokyo-based Dai-ichi Mutual, Japan's second-largest life insurer, currently invests in more than 100 hedge funds as well as funds of hedge funds, Yuji Hirai, manager of the firm's structured and alternative investment department, said in an interview in Tokyo. He declined to provide specific targets for hedge fund allocations.

“Our goal is to increase our allocation to hedge funds,” said Hirai, 40. “We're in a difficult market, no doubt, but for hedge funds chasing absolute returns, this is the time to prove their outperformance.”

Hedge funds struggled to attract capital this year after the U.S. housing market collapse and ensuing credit crunch crimped returns. They collected $29 billion of new money in the six months through June, down 75 percent from a year earlier, as the industry turned in its worst first-half performance in two decades, according to Hedge Fund Research.

Dow Kim, the former head of trading and investment banking at Merrill Lynch, dropped plans to start a hedge fund after investors backed out, people with knowledge of the matter said.

Dai-ichi Returns
In Asia, the industry has fared better. Assets invested in hedge funds focused on the region grew 0.25 percent in the second quarter, as performance losses were offset by capital inflows from investors, the Chicago-based industry researcher estimates.

Dai-ichi Mutual began systematically investing in alternative assets including hedge funds in 2001, according to Hirai, who heads a team of 11 managers including one in London and one in New York.

Insurance companies “have to meet their own investment targets and I would be fairly confident that just like pension funds, their traditional portfolios are hurting right now,” said Rory Kennedy, chief operating officer of Tokyo-based United Managers Japan, a fund adviser. “It would be natural for them to increase their exposure to alternatives. The volatility across the world now is opening up opportunities.”

Allocation to hedge funds is currently in the “single-digit percentage” of assets, Hirai said. Most of the funds are run by managers in the U.S. and Europe. Hirai declined to be more specific.

'Larger Consumers'
Dai-ichi posted 3.14 percent return on assets last fiscal year beating internal targets for the first time since it began releasing figures in 2001. The company set a 3.1 percent benchmark for returns last year.

Fixed-income assets including domestic bonds accounted for more than half of Dai-ichi's portfolio at the end of March, while domestic equities and overseas securities made up 14.9 percent and 19.5 percent respectively, according to the firm's latest financial statement.

“We certainly expect Japanese insurance companies to become larger consumers of alternative investment products,” said Ed Rogers, the chief executive officer of Tokyo-based Rogers Investment Advisors Y.K., which advises clients on what hedge funds to invest in. “They are all pressed to match liabilities and assets, and investing in the absolute return space seems the only way they will be able to do it.”

Among strategies Dai-ichi invests in are so-called event-driven funds, which target companies undergoing or about to go through events such as mergers and acquisitions and asset sales; and macro funds, which can trade everything from a single stock to bond futures, Hirai said.

Seeking Opportunities
Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.

In one way, the global credit contagion may be playing into the hands of hedge funds, said Hirai.

The world's largest banks and securities firms posted more than $490 billion of asset writedowns and credit losses since the tumult started a year ago, forcing them to sell stakes, unload assets and fire employees.

As investment banks retrench, star employees are moving to hedge funds, said Hirai, whose team meets with about 200 funds a year.

“Even the best managers are having a difficult time keeping up their performance right now,” he said. “But it surely is an exciting time and potentially a great opportunity for them to actually create returns for investors.”

Are hedge funds the best means to safeguard returns in times of financial crisis? Which of the other asset classes can provide similar security in investments as hedge funds?

2008-08-01T00:02:00.000-07:00

Will Hong Kong's fund management industry

maintain a fast-paced growth in the coming years?

Hong Kong's fund management industry expanded at the fastest pace in at least four years to HK$9.63 trillion ($1.2 trillion) at the end of 2007, the city's Securities and Futures Commission said in an annual survey.

The size of the industry increased 57 percent last year, compared with 36 percent in 2006, according to a report posted on the regulator's Web site.

The accelerated growth came “on the back of strong performance in the financial markets, inflows of investment funds and gain in investment mandates,” SFC said in the report.

More than 68 percent of the HK$9.57 trillion overseen by the Hong Kong industry, excluding those managed in real estate investment trusts, was raised from non-Hong Kong investors, the highest proportion in five years, said the SFC.

China's CSI 300 Index gained 162 percent last year, the best-performer among 90 major global indexes tracked by Bloomberg, tempting foreign investors to use Hong Kong to gain access to the country's stock market. Hong Kong's own Hang Seng Index rose 39 percent in 2007.

China's State Administration of Foreign Exchange cleared mainland fund management companies, securities firms and commercial banks to invest $54.6 billion of client money in international markets by June, giving a boost to Hong Kong's fund management industry.

Mainland Chinese contributed at least HK$130 billion toward Hong Kong's fund industry through the so-called qualified domestic institutional investors or QDII, a program that allows them to buy international securities.

The SFC survey covers money managers, private banks, fund advisers and insurance companies licensed for asset management businesses.

Although Hong Kong has been a promising venue for investments for the past years, how are asset managers preparing to cope with possible losses caused by declines in the global market?

2008-07-25T01:41:00.000-07:00

As Singapore hedge-fund assets swell to $59 Billion,

will the city-state have enough room for more investments?

Hedge-fund assets in Singapore more than doubled to about S$80 billion ($59 billion) at the end of last year, contributing to a 32 percent growth in the city's asset management industry, the central bank said.

The number of hedge-fund managers increased by more than 50 percent to almost 300 at the end of 2007, the Monetary Authority of Singapore said in its annual survey of the city's asset management industry.

“The profiles and investment strategies of the hedge fund managers in Singapore are highly varied and diverse,” the central bank said.

Singapore has sought to transform the island into a center for hedge funds by offering tax incentives and making it easier for them to obtain licenses than other Asian cities such as Hong Kong and Tokyo.

Total assets managed by Singapore-based managers rose to S$1.17 trillion, from S$891 billion at the end of 2006, the seventh consecutive year of “double-digit” year-on-year growth, the central bank said.

About 86 percent of the total assets last year were sourced from overseas, almost half of which came from the Asia-Pacific region. Managers allocated about 57 percent of the total assets into equities and 12 percent into alternative investments such as hedge funds and private equity, two percentage points higher than in 2006, the central bank said. Investments in bonds fell five percent to 12 percent of all assets.

The number of firms managing more than S$5 billion in assets increased 23 percent last year, and accounted for 47 percent of the total assets in the city state.
The number of investment professionals, including portfolio managers, traders and analysts, rose 22 percent to 2,185, the central bank said.

Will Singapore ever reach an “investment saturation point”? What may or may not cause this?

2008-07-18T00:58:00.000-07:00

Will Legg Mason's new fund stand out in Asia's lucrative bond market?

Legg Mason, the Baltimore-based money manager that oversees about $950 billion, began selling an Asian bond fund in Hong Kong that seeks to profit from regional economic growth and currency appreciation.

The Western Asset Asian Opportunities Fund targets to beat the HSBC Asian Local Bond Overall Index by an average 1.5 percentage points annually “over the course of a market cycle,” said a company statement. Rajeev De Mello will lead a team at Legg Mason unit Western Asset Management overseeing the fund.

“The Asian bond market is currently the world's fourth-largest and still growing at a rapid rate,” De Mello said in the statement. “Strong economic fundamentals, favorable development in instruments and infrastructure, and structural appreciation of the region's currencies are making local bonds an attractive asset class.”

Investors are moving money out of equities and demanding higher yields on bonds after the worst housing crisis to hit the U.S. since the Great Depression led to falling share prices and over $420 billion in writedowns and losses at financial firms globally. The HSBC Asian Local Bond Overall Index yielded 5.525 percent on July 16, rising from 5.116 percent at the end of 2007.

The fund will invest at least 70 percent of its total assets in debt securities issued by Asian governments and companies as well as derivatives on Asian interest rates and currencies, said a marketing document. Asia is home to the two fastest-growing major economies, China and India.

The fund will focus on local-currency investment grade, dollar investment grade and high-yield credit, and may also buy unrated debt to boost returns, the statement added. Its investments may include asset-backed and mortgage-backed securities, the marketing material said.

Legg Mason began managing Asian local-currency bonds in 1994. Western Asset Management's $508 billion fixed-income assets make it the third-largest U.S. manager of bonds. The Western Asset Asian Opportunities Fund has also been sold in Europe, including the U.K., and Singapore.

What do you think should future Asia-focused funds offer in order to maximize yields and survive the competition in the region?

2008-07-10T22:00:00.000-07:00

Is Nomura implementing stricter rules after the ban?

Nomura Holdings resumed broking services for Japan's public pension fund, the manager of more than $1 trillion of retirement assets, after a three-month ban following allegations of insider trading at the securities firm.

Government Pension Investment Fund lifted its ban on July 9 after Nomura, Japan's biggest brokerage, submitted a report to regulators detailing how it will improve internal controls, said Kouichi Nojima, a councilor at the fund, in a telephone interview.

Nomura lost some broking mandates from Japanese asset managers after a former employee at its mergers and acquisitions department was arrested in April on insider trading charges.

The Tokyo-based company is among the top third of brokers regularly used by the fund for trading securities including Japanese government bonds and corporate bonds, said Seiichi Kusakabe, the fund's head of in-house trading.

Japan's Financial Services Agency ordered Nomura to improve internal controls and compliance on July 3.

The Tokyo District Public Prosecutors Office arrested Li Yu, a former Nomura employee, and two other Chinese citizens in April. Li was charged with insider trading, prosecutors said in June. Nomura fired Li, the brokerage said at a press conference on April 22.

Japan's Pension Fund Association, which manages 13.2 trillion yen of retirement assets, also said in April it would stop placing stock-broking and bond-trading orders through Nomura until the regulator completed its probe and Nomura demonstrated its compliance with regulations.

The association's officials declined to comment if it resumed its trading or not.

How could Nomura's operations be affected by this issue?

2008-07-04T00:07:00.000-07:00

Will Japan become Asia's Pied-piper of green energy?

Japan will increase yen loans and investment in clean-energy technology to help cut greenhouse emissions in China and India, Asia's two economic powerhouses.

The Japan Bank for International Cooperation, the government's main overseas lender, said the investment is part of the $12 billion in loans and grants Prime Minister Yasuo Fukuda has promised to spend in five years to tackle climate change.

“We have to focus on major developing countries, and as a financer we are going to put more and more money into private-sector investment in these countries, not only by lending but also by equity financing,” Takashi Hongo, director-general of environment finance at JBIC, said in Tokyo. Hongo declined to say how much money the bank has set aside for the projects.

Japan, together with the World Bank, the U.S. and the U.K. plans to raise a $5.5 billion fund to help poor nations develop clean technology. Finding ways to convince developing countries to agree to emissions targets is likely to be a focus of the Group of Eight industrialized nations summit in Japan's northern island of Hokkaido next week.

“We are proposing to utilize multi-governmental funds as a tool to mitigate investment risks in developing countries and boost capital spending by private companies on clean projects,” Hongo said. The fund “should be used as a kind of catalyst to attract private money.”

Carbon Underground

Environment ministers of the Group of Eight rich nations in May also vowed to raise a pool of money to develop technologies that would help them meet a goal of halving global emissions blamed for global warming by 2050.

Hongo named carbon-capture-and-storage technology, in which carbon-dioxide is caught in the air and stored underground, as “the key” to reaching the emissions-cutting goal. G-8 energy ministers last month agreed to jointly develop carbon capture by 2020 and launch 20 large-scale demonstration projects by 2010.

In May, China and Japan said they would cooperate in using the technology to inject carbon dioxide into oil wells to both store the gas and to make the crude more viscous, so it can be pumped faster. The countries are expected to use the method at China's Daqing offshore oil field.
G-8 leaders want to reach an agreement when they meet next week that will lay the groundwork for a successor to the 1997 Kyoto treaty on climate change. About 180 nations are meeting through 2009 to negotiate the accord, due to be signed in Copenhagen next year.

The Kyoto agreement requires its 37 signatory nations to cut emissions by a combined 5.2 percent from 1990 levels by 2012. China and the U.S., the two biggest emitters, aren't subject to any targets. The U.S. rejected Kyoto as being unfair because it set no emission cuts for developing nations.

Will Japan's initiative be welcomed by developing countries with open arms?

2008-05-15T20:51:00.000-07:00

Khmer Rouge leaves, Jim Rogers Enters. Will Private Equity Investments Boost the Economy of One of Asia’s Minnows?

Private-equity investors are venturing into Cambodia, as the nation that three decades ago abolished money under the Khmer Rouge seeks more than $6 billion to rebuild itself.

Leopard Capital and Cambodia Investment & Development Fund are among those planning to put more than $450 million in the second-poorest of 10 Southeast Asian nations. Cambodia Investment is getting advice from Jim Rogers, who predicted the start of the commodities boom in 1999, and Marc Faber, who forecast Asian assets would decline before the regional financial crisis in 1997.

“It's a country that's changed a lot and investors are finally waking up to that,” said Douglas Clayton, founder of Leopard Capital, who is based in Phnom Penh and is seeking to raise $100 million. “Most people have an outdated perception of Cambodia; clearly the country has made significant progress.”

Prime Minister Hun Sen is relying on the country's oil and mineral resources to attract foreign investments and reduce Cambodia's dependence on clothing exports and tourism for growth as he prepares for an election in July. The funds will move money into banks, office buildings, luxury hotels, ports and other projects.

“Cambodia does have a lot of natural resources, it does have an ambitious population, and it does have some assets,” said Singapore-based Rogers, who co-founded the Quantum hedge fund with George Soros during the 1970s, and is now chairman of Rogers Holdings. “Most countries that come out of something like they have are inclined to be pretty safe for a while because they're trying to get money in.”

Economic Growth

Leopard Capital's first planned investment, a housing project in Siem Reap, probably will generate a return of more than 60 percent a year, about three times the internal target for private-equity investments, said Clayton, who moved to Phnom Penh from Bangkok last June.

Clayton was a hedge fund manager at Knight Asia Group and head of CLSA Securities in Thailand before setting up Leopard Capital in 2007. Faber, publisher of the Gloom, Boom & Doom report, is a director at Leopard Capital.

Peter Brimble and Bradley Gordon, Clayton's former partners at Leopard Capital, are starting the $100 million Cambodia Emerald fund this year to invest in tourism, agriculture, financial institutions, infrastructure and real estate.

The fund plans to close at least one deal before the end of the year, said Brimble, who's based in Phnom Penh. LR Global Partners in New York and London-based Kazimir Partners are investors in Cambodia Emerald, he said.

‘Growth Era’

Cambodia's economy expanded 9.6 percent in 2007, after growing by at least 10 percent during the previous three years, according to data compiled by the World Bank. About a third of the population live on less than 50 cents a day and 90 percent are in rural areas.

“Cambodia's in the beginning of a growth era,” said Julien Kinic, investment officer at Proparco, the private financing arm of the French Development Agency in Paris. “It's like Bangkok 20 years ago or Ho Chi Minh City 10 years ago,” he said, adding that Proparco plans to invest in one of the funds.

More than $6 billion may be invested in Cambodia in the next three years mainly in oil and natural gas, infrastructure projects, real-estate development and agriculture, according to Cambodia Investment, which is run by Frontier Investment & Development Partners. Melbourne-based BHP Billiton, the world's largest miner, is among companies vying for exploration rights for iron ore, gold and other minerals.

‘Seriously Lacking’

“Cambodia is seriously lacking in human and investment capital,” said Marvin Yeo, co-founder of Frontier Investment, who will oversee the fund from Phnom Penh and Bangkok.

Yeo left his job as a financing specialist at the Manila- based Asian Development Bank this month to set up the fund, which plans to invest as much as $100 million in hospitality, telecommunications, infrastructure, banks and agriculture in the next three months.

The nation has pitfalls, according to Transparency International, a private monitoring agency based in Berlin, which ranked Cambodia 162nd of 179 countries in its annual report on perceptions of corruption last year. Cambodia also doesn't have a stock exchange, though one is planned to open in 2009.

July Elections

The funds will need to compensate investors for the risks, said Kelvin Chan, a Singapore-based senior vice president at Partners Group, a manager of private equity and hedge funds. Private-equity investors in Asia made a return of about 67.5 percent last year, according to the Centre for Asia Private Equity Research in Hong Kong.

“Cambodia is too early for most investors,” said Chan, who declined invitations to invest in the funds. “Political stability, the rules and regulations must be in place.”

Cambodia has a non-investment grade rating of B+ from Standard & Poor's, two levels below neighboring Vietnam.

“I don't believe private equity will take off rapidly in Cambodia until there are very strong indications that private equity is a bankable model in Vietnam, which holds the key to investors' confidence in the Indochina region,” said Kathleen Ng, managing director at the Centre for Asia Private Equity Research in Hong Kong.

The government will continue its ‘market-oriented reforms’ after general elections in July, S&P said in an April 4 report. The ruling Cambodian People's Party and the main opposition Sam Rainsy Party are ‘committed to the same pro-business, pro-growth policy platform,’ according to Cambodia Investment.

Will the Foreign Investors Trust the Fact that The Cambodian Government Is Cleaning Up its Act? Will They Place Their Funds into Cambodia?

2008-05-08T22:14:00.000-07:00

Isn’t It About Time That India Realise That Overly Tight Regulation Will Not Do Their Economy Any Good?
India's government will try to win agreement from coalition allies to ease restrictions on foreign investments in insurance, banking and pensions in its final year in office, Finance Minister Palaniappan Chidambaram said.

“Financial sector reform is our unfinished agenda,” Chidambaram said in an interview. “We failed to convince our partners that sectors which are closed or partly closed be opened for domestic private and foreign investors.”

The four communist parties that support Prime Minister Manmohan Singh's United Progressive Alliance have blocked plans to increase foreign ownership of insurers, now restricted to 26 percent, and remove a 10 percent cap on the voting rights of investors in local non-state banks such as HDFC Bank India's pension business is not open to foreign investors.

Financial reforms, including development of a corporate bond market, pensions and insurance will spur investment and add as much as 1.5 percentage points to India's economic growth, according Lehman Brothers. Eighty percent of the country's 1.1 billion people have no insurance cover and 88 percent of the workforce doesn't contribute to pension schemes, according to Lehman Brothers.

India's $912 billion economy, Asia's third-largest, has expanded at a record average pace of 8.7 percent each year since 2003. Singh's government, which is entering its fifth year in office this month, wants to accelerate the rate of growth to as much as 10 percent by 2012 to create new jobs and reduce poverty.

Financial Muscle

That will require greater financial muscle in banks to help fund local companies expand capacity and buy assets abroad. The combined assets of all Indian banks is less than the Industrial & Commercial Bank of China, China's biggest lender.

Singh's trade and investment panel recommended last month that India, which has over $300 billion of foreign exchange, the world's sixth-largest, must consider using part of the money to create a fund that will help companies buy assets abroad.

“The only argument in favour of a sovereign wealth fund is that since we have huge reserves that yield modest returns, you could use part of that reserve to enhance your return,” Chidambaram said. “There are great risks in that strategy - how are you going to manage it? How are you going to be accountable to it? I don't think it will come through anytime quickly.”

That means India needs more foreign investment to increase the size of its financial services industry.

Insurance Companies

India in 2000 opened up its insurance industry to overseas investment by dismantling the 44-year monopoly of state-owned Life Insurance of India and its non-life counterparts.

Though their stake in Indian insurers is limited, companies including New York Life Insurance and Prudential have entered the market, which has since more than doubled to $22 billion in annual premiums.

Singh's coalition government hasn't succeeded in implementing its promise to raise the foreign ownership limit in insurance companies to 49 percent as the bill does not have majority support in parliament.

Small private Indian banks are strapped for capital and unable to find investors because of the cap on voting rights.

India has been seeking to attract overseas investment to the nation's 31 non-state lenders, many of which are constrained by capital shortages and limited geographical reach, and need funds to compete with bigger rivals.

Foreign banks have cited the cap on voting rights as a disincentive to investment. Private banks typically have about 200 branches and are attractive to overseas banks seeking to tap rising demand for personal loans, mortgages and credit cards.

Indian now allows foreign banks controlling stakes only in private banks deemed to be weak and in need of capital, a rule it will start loosening in 2009.

“If the legislations that underpin financial sector reforms are passed within a year, then that would be satisfying,” Chidambaram said.

Is It Too Late For India To Implement The New Regulations? Will Their Banks Ever Catch Up With Rivals From China?

2008-04-27T18:38:00.000-07:00

Is Singapore the best place for Galleon’s funds?

New York-based hedge fund manager Galleon Group is setting up a Singapore operation to manage its $1.1 billion Asian long/short equity fund and to venture into new businesses, industry sources said.

The hedge fund manager, which has invested a total of $7.5 billion in technology, healthcare, financials, consumer and private equity, is in the process of hiring Asian experts for its regional operation, the sources told Reuters.

The company, set up by Sri Lankan-born Raj Rajaratnam in 1997, has been investing in Asia for the last 10 years, but in 2006 it launched a Asian long/short fund -- which can profit in both falling and rising markets.

The fund will be managed by the Singapore team, one source with direct knowledge of the plans said.

Galleon declined to comment.

The move underscores Singapore's growing importance as an Asian hedge fund centre.

“It is easier to set up an office in Singapore for hedge funds as well as for service providers,” said Rajeev Baddepudi, an analyst at consultancy Eurekahedge. “It has the advantage of better access to the key regional markets such as India.”Last year Swiss-based RMF, which is part of the Man Group and manages fund of hedge funds, moved its Asia headquarters to Singapore from Tokyo, citing Singapore's attractive regulatory climate, international environment, and better lifestyle for its employees.

Another draw is Singapore's two big state-backed investment firms: Temasek and Government of Singapore Investment Corporation (GIC), which manages Singapore's reserves.
Temasek and the GIC have assets of $120 billion and over $100 billion respectively, and many of the fund managers who flock to Singapore compete for the mandates to invest the portion that is placed with independent investment firms.

But this year's market turmoil has undermined returns at Asian-focused hedge funds, which manage $156 billion according to Eurekahedge.

After producing five straight years of double-digit percentage gains, the Eurekahedge Asian Hedge Fund Index is down 7.9 percent this year up to March. This compares with declines of 1.7 percent and 3.2 percent respectively in its North American and European indexes.

With all these challenges, will Galleon succeed in managing its funds and venturing into new businesses in Singapore?

2008-04-18T02:33:00.000-07:00

Will activist fund succeed in Japan?

Privee Investment Asia will soon launch a $100 million long/short equity fund, profiting in both falling and rising markets, that will initially invest in Japanese small cap firms, the Japanese fund group's head said.

Privee Investment Asia is part of Privee Investment Holdings, a Tokyo-based activist investor, which takes big stakes in underperforming and poorly run Japanese firms with a view to turning them round within two to three years.

"We're going to launch a long/short fund," Masano Yoshitake, Privee Investment Asia's Managing Director and Chief Investment Officer, said at the Reuters Hedge Funds and Private Equity Summit in Singapore.

"We're looking to launch this year. All the documentation has been completed. We're just looking for the right timing."

He said the fund was aimed at institutional investors, including funds of funds, endowments and family offices.

Hedge funds pursuing a long/short strategy are supposed to profit in both rising and falling markets by combining a group of long stock positions with short positions of stocks or stock index futures.

Last October, Privee launched its Privee Japan Fund with 3 billion yen ($29.3 million) in seed money from its parent company to invest in Japanese companies.

"Our strategy is to build up significant stakes in those companies, 30, 35, sometimes 50 percent," Yoshitake said. "We are still in the process of accumulating the positions."

Yoshitake, who previously was a portfolio manager at Allianz Global Investors, said that while Privee was seeking seats on companies' boards it was not looking for aggressive management reshuffles.

Its target firms usually trade at a price/book ratio of 0.2 to 0.3 times and its investment horizon is two to three years.

"The investment return on individual stocks could be 100 percent or more. Our target return on the portfolio would be 20 to 25 percent per annum," Yoshitake said.

Seiji Himuro, Privee Fund Group's co-chief operating officer, said the fund had opened an office in Singapore to profit from easy access to investors and favorable regulation.

Himuro is a co-founder of Privee Investment Holdings and previously ran the Tokyo proprietary trading desk of Salomon Brothers, where he also worked with John Meriwether, co-founder of the Long-Term Capital Management fund which imploded in 1998.

Will the institutional investors bite?

2008-04-10T23:53:00.001-07:00

Will 7-10% returns materialize?

ING Funds expects the ING Annual Alpha Access Capital Protected Fund - a three-year close-ended capital protected fund - to generate annual returns of 7% to 10%.

Its chief executive officer Steve Ong said the fund ensured investors with 100% capital protection at the date of maturity by investing in ringgit-denominated financial instruments.

These instruments issued by local financial institutions would return 100% of the invested capital back to investors at the end of the three years, he said at the launch.

Under its investing strategy, the fund would invest up to 10% of its net asset value in the ING Outperformance Alpha Option, a three-year ringgit hedged call option, consisting of Global Emerging markets ex-Asia and the Asia Emerging markets indices versus the US S&P 500 index.

"The two global emerging markets basket of indices offers investors diversification as they are not correlated with one another,” he said.

The Global Emerging Markets ex-Asia includes Russian Depository Index, Central and European Europe Index, iShares MSCI Brazil Index Fund and iShares MSCI Mexico Index Fund.

The Asia Emerging Market consists of Hang Seng China Enterprises Index, Kospi 200 Index, MSCI Taiwan Index and ASX 200 Index.

Ong said the fund aimed to provide investors with an annual payout regardless of bull or bear market conditions with the potential outperformance of the two global emerging markets basket of indices versus the US S&P 500.

Based on historical data, these markets have been registering higher returns than the US S&P 500.

"We believe there is still room for more growth in the near future for these markets compared with the more mature US market," he added.

The approved fund size is 500 million units with a minimum initial investment of RM5,000.

ING Funds has targeted to increase the funds under its management to RM3bil from about RM2bil at the end of 2007 with the launch of another three products this year.

Is this too good to be true?

2008-04-03T18:49:00.000-07:00

The end for underperforming funds?

Polar Capital has closed two hedge funds and a long-only vehicle after a prolonged period of underperformance.

These are Polar’s Asia ex-Japan long-only portfolio and its Asian technology and absolute return hedge funds, the latter dubbed Lotus.

The latter fell from $86.7m in June 2007 to $56.8m in December and posted a total return of -12.18% for 2007.

Its Technology Absolute Return portfolio fell from $79.1m to $36.1m over the same period and lost 27.58%.

Polar Capital said the fall in total assets under management from $3.6bn to $3.2bn over the year reflects a loss of 11.1%.

It blamed the fund closures on poor performance as a result of challenging market conditions.

Mark Kary, Polar's chief executive, said: “We have continued to feel the impact of investors disenchantment with the Japanese equity market, which has lead to continuing redemptions in both our long-only and our underperforming Japanese hedge fund.

“On the hedge fund side, we have taken the opportunity to rationalise our range through the closure of the modest sized Asian technology and Asian absolute return funds both of which had delivered unsatisfactory returns.”

The firm was co-founded by Brian Ashford-Russell and Tim Woolley in 2001, as a technology specialist.

In this period of financial instability, will more hedge funds be forced to close too?

2008-03-27T19:07:00.000-07:00

China opening up to private management services?

Bank of Communications Schroder Fund Management, the Schroders China fund joint venture, said it signed an agreement with a private Shanghai enterprise to manage close to 100 mln yuan worth of assets.

The private-wealth account is the first to be managed by an asset management firm in China.
The joint venture did not name the private enterprise.

The announcement follows the launch by the China Securities Regulatory Commission (CSRC) of new rules from January 1 this year allowing fund management companies to provide wealth management services to institutional investors.

The funds were also allowed to offer services to individual clients who can invest at least 50 mln yuan.

Bank of Communications Schroder Fund Management won approval to offer such services on Feb 26.

So far, the CSRC has given permission to a total of 23 Chinese mutual fund companies to offer private wealth management services, allowing them to invest in stocks, bonds, stock funds, central bank bills, short-term debt, asset-backed securities and other regulated products.

Will more firms be given permission to offer such services in the short term?

2008-03-14T02:44:00.000-07:00

Will investors be attracted to Vietnamese Real Estate Investment Fund?

Japan Asia Securities plans to sell from mid-April what it claims to be Japan's first publicly traded investment trust fund products that invest in planned real estate development projects in Vietnam, informed sources said.

The Tokyo-based brokerage house expects brisk demand for investment in Vietnam, which is regarded as a promising emerging economy following the so-called BRIC economies of Brazil, Russia, India and China.

A Hong Kong firm will undertake management of the investment trust fund with advice from a Japanese real estate company that has ties with some Vietnamese firms.

A minimum investment amount is expected to be set at one million yen, with an investment period of three years, which may be extended by two years.

On the back of an inflow of overseas capital, demand for the development of real estate such as hotels, offices and housing is increasing rapidly in Vietnam, according to the sources.

Japan Asia Securities plans to attract investors through its Vietnam investment seminars and Internet advertising.

Does Japan Asia’s move show that the foreign investment flow into Vietnam is set to continue?

2008-03-02T17:55:00.000-08:00

Will allotting options allow Lotus MF to retain employees?

With high levels of attrition plaguing the mutual fund industry, AMCs are increasingly offering Esops to retain talent. Lotus Mutual Fund is the latest to join the race.

UTI Mutual Fund recently announced plans to go public and allotted stock options to its employees. Lotus Mutual Fund has become the second fund house to take the same route.

Experts reckon that Esop culture is not new in the fund industry. Kothari Pioneer (the erstwhile Franklin Templeton), had diluted 4.5 per cent stake in favour of its employees, in the 90s.

Lotus Mutual Fund has diluted a 19 per cent stake in favour of 180 odd employees. The fund house does not have any immediate plans for an initial public offer, but has not ruled out an IPO after 3-5 years.

Ajay Bagga, CEO, Lotus India AMC, said, “When major fund houses would have listed five years down the line, these shares would become more valuable as we are a fast growing company.” The fund house has a net worth of Rs 92 crore and AUM exceeding 10,000 crores.

Fund houses have been luring talent with various promotional offers and perks, but to no avail. The employees of Standard Chartered fund were promised hefty bonuses provided they remained with the company for at least two years.

While Indian AMCs may not give Esops, their parent companies have this policy, according to the market watchers.

In a constantly evolving industry where new foreign fund houses set up bases everyday, it is not hard to imagine why people are moving.

Recently, Morgan Stanley Mutual Fund attracted Jayesh Gandhi and Navneet Munot from Birla Sun Life Mutual Fund. Prateek Aggarwal from ABN Amro Mutual fund moved to the yet-to-be launched Bharti Axa Mutual Fund. Similarly, Suyash Chaudhary from Standard Chartered Mutual Fund migrated to a fund house.

CEOs are not far behind. Sandeep Dasgupta left Deutsche Mutual Fund to join Bharti Axa Investment Management. Arindam Ghosh, who was with Fidelity’s Asia Pacific business team recently took over as the CEO of South Korean mutual fund, Mirae Asset, which recently launched in India.

Even Pankaj Razdan, the star CEO at ICICI Prudential Mutual Fund joined Birla Group’s financial services arm as a deputy CEO. Some fund managers moved to private equity and hedge funds.

Will stock options be the trick that enables Lotus to lure high flying employees?

2008-02-22T00:54:00.000-08:00

A different deal for RBS in India?

Decks have been cleared for Royal Bank of Scotland (RBS) to retain the private banking unit of ABN Amro in India and Indonesia. This is a departure from the actual deal signed between the acquirers of ABN Amro - RBS, Fortis and Santander - where the Belgian bank Fortis was to get ABN Amro’s private banking business, worldwide. Despite the agreement, India and Indonesia have been kept out since Fortis does not have a banking licence in these countries and may not get a new licence anytime soon.

However, Fortis will get an entry into India since it will go ahead with the takeover of ABN Amro’s asset management company (AMC) in the first quarter of next fiscal. A consortium of RBS, Fortis and Santander took over the Dutch bank late last year. Under the consortium deal, RBS will get ABN Amro’s North American business, excluding LaSalle ABN’s US banking operation, which was sold to Bank of America. RBS will also get ABN’s European business, excluding some portions.

Fortis will get its operations in Netherlands, the global private banking business - excluding Latin America - and also the global asset management business. Santander will get Italian bank Antonveneta, Dutch credit firms Interbank and DMC Consumer Finance and most of the Latin American operations.

In Asia, RBS is taking over the corporate and retail division of the bank in Asia while AMC and private banking, internationally, would go to Fortis. Confirming the move, ABN Amro executive vice-president and CEO (India) Meera H Sanyal said, “Private banking in India and Indonesia will be a part of Royal Bank of Scotland. We are delighted that we will be able to offer uninterrupted services to our private banking clients.”

The private bank units in both countries are an integral part of the bank and separating them would have been a problem. Also, both RBS and Fortis do not have a banking licence in India. In India, most of the banking business will be taken over by RBS. In both countries, the Dutch bank had an onshore private banking presence. A decision to this effect was taken in the past few days.

The local private banking unit has assets under management (AUM) of around $1.4 billion with 56 employees. In retail banking, the bank had different products to cater to all segments of the market, including high-end retail banking. The private banking unit here has a customer base of over 2,000. And the unit is present in six cities in the country. The three banks are awaiting permission of the Dutch regulator for the final deal to go through. Post-approval, the banks will approach individual regulators in respective countries.

In India, ABN Amro AMC has an AUM of Rs 8,529 crore as on January 31. Fortis does not have a presence in the mutual fund industry. ABN Amro is present in 16 countries across Asia.

Will this exploit into India be a boon or a bane for RBS?