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BNY Mellon to expand PB distribution through the region

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This is a sponsored article from BNY Mellon Investment Management.

BNY Mellon Investment Management (BNY Mellon IM), the world’s largest multi-boutique asset manager, has set its sights on Asia Pacific’s private wealth market and will prioritise distribution through both global and local private banks in 2018 to meet growing demand from the region’s high net worth investors for its solutions.

BNY Mellon IM has big plans for Asia intermediary business
“Our distribution business has been mainly focused on the institutional side,” says Nicolas Kopitsis, head of intermediary distribution, CEO Singapore. “However, given the great opportunities within the growing private wealth industry in the region and the strong connections and expertise that we have, we are planning to further grow our Asian intermediary business going forward.”

The timing couldn’t be more astute. Asia’s private banks have enjoyed something of a vintage year – particularly in Greater China – but the fund houses are still not meeting the complex and demanding needs of private banks and their clients.

“To date the intermediary business here in Asia has not been serviced correctly in my view,” says Kopitsis, explaining that because many private banking gatekeepers continue to be situated in Europe, asset managers need to be more globally coordinated in order to properly cover private banks rather than purely focusing on local investors.

So what makes a successful asset manager? Kopitsis points to two fundamental “pillars”: production and distribution.

BNY Mellon IM employs a multi-boutique model that encompasses 12 different asset managers across every asset class which manage a total of US$1.8 trillion in AUM globally. Through this unique setup, Kopitsis believes the firm is well-positioned to exceed in both production and distribution, therefore bringing superior servicing to private banks throughout Asia.

“Each investment manager has its own proprietary investment processes without an overall CIO house view, so the boutiques only need to focus on generating alpha, while we, on the BNY Mellon side, take care of the overall operations, marketing, and distribution,” he explains.

In addition, as most of the private banks are currently operate under ‘guided architecture’ conditions, BNY Mellon IM’s ability to establish distribution agreements and provide access to 12 unique sets of capability makes the model even more competitive, Kopitsis adds.

Nicolas Kopitsis
Head of Intermediary Distribution
CEO Singapore
BNY Mellon Investment Management .                                               
Lindsay Wright
Head of Distribution, & Co-Head of Investment Management, APAC
BNY Mellon Investment Management, Hong Kong

In this rising rate environment, where do the opportunities lie and what are clients looking for?

Asian investors’ ‘hunt for yield’ is not a new phenomenon; yet in this low but rising rate environment, this perennial search is becoming all that more difficult. Against this backdrop, Kopitsis believes European senior secured loans and global short-dated high yield will provide attractive risk-adjusted performance and, year-to-date, both strategies have gained a significant amount of traction from investors.

“European loans provide a similar level of income as high yield bonds due to their sub-investment grade, but they are senior secured so investors have less volatility,” Kopitsis says.

Since the introduction of Basel III, the banking sector overall has undergone huge improvement. In addition, as European loan rates tend to be floating in nature, investors typically take less duration risk when compared with investing in fixed rates, thereby making European loans a compelling class at this point in time. Alcentra, one of BNY Mellon IM’s 12 boutiques, focuses on sub-investment grade debt markets, with a track record of investing in loans dating back to 2002.

Another strategy garnering significant interest from clients is global short-dated high yield, he points out. Specifically, global high yield typically has duration of around five years with 5.5% yield on average, however short-dated bonds have only 1.5 years in duration with slightly lower yield at 4.5%.

“Investors forsake 1% yield but they would receive less volatility when investing in the short-duration space,” explains Kopitsis. “Also, due to the short-dated nature, this type of paper would roll off each time when bonds mature, so we can reinvest in higher rates if interest rates are rising.”

The BNY Mellon Global Short-Dated High Yield Bond Fund, managed by Insight Investment, saw a 2.5% return on a six-month cumulative basis, significantly beating the benchmark, Cash Benchmark LIBOR USD 3 month’s 0.7%.

This is a sponsored article from BNY Mellon Investment Management.

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