Legg Mason Asset Management on Asia’s investment opportunities

Transcript

Asset management is a multi-billion dollar industry, but navigating the market can be tricky – especially in emerging economies. One institution that has successfully established itself in the region is Legg Mason Asset Management. World Finance speaks to Lennie Lim and Freemason Tsang from the firm to find out about the challenges of working in Asia, and the opportunities open to investors.

World Finance: Now Lennie, Legg Mason has over $700bn of assets under management worldwide, so how well positioned would you say Asia is to drive the company’s growth forward?

Lennie Lim: It is quite rare for a firm of our size and given our history, to be so new in the market. We first carried the brand of Legg Mason into Asia when we acquired Citibank Asset Management in 2006. Since then we have weathered the global financial crisis very well, and now we are in the growth stage. We are firmly establishing our business throughout Asia.

For mutual funds, Asia is the fastest growing region in the world, relative to the US and relative to Europe

World Finance: How would you say asset management is developing in Asia, and what challenges do you face in that region?

Lennie Lim: For mutual funds, Asia is the fastest growing region in the world, relative to the US and relative to Europe. What’s driving this growth is very strong economic growth from various Asian countries, at the same time as a strong culture within Asia in terms of savings, and the sheer size of the population.

It can be seen in the amount of wealth that is being created in Asia, but it is also important to keep in mind that many of the Asian countries are still very young in terms of its mutual fund history.

Take China for example; there is less than 15 years of history in mutual funds. As such, in terms of challenges, you will see that Asia is very dynamic in its changes. New regulations are coming in all the time, as the industry goes through its growing pains.

This market is therefore very fast paced, the environment changes frequently and it is rather complex, with so many countries at different stages of growth, and each with their own regulations. But in Asia we always say; in every adversity lies opportunity. And that is how we see Asia right now.

World Finance: Freeman, in a competitive market such as asset management in Hong Kong, what differentiates you from other asset managers in the region?

Freeman Tsang: Hong Kong is one of the mature markets within Asia in terms of mutual fund.

The size of our firm offers a global platform to provide a range of products. And of course, we have to have the local people, to have the local touch, with the local distributors.

We often visit local distributors to talk to them, to see what they need. And then we find the best solution, and consistently and precisely deliver this solution to the bankers, the trainers, and the product people.

World Finance: How do you identify investment opportunities for your clients and what are the main investment opportunities in Hong Kong and China?

Freeman Tsang: The beauty of Legg Mason is that it represents six individual asset management companies.

They provide the investment view to us and we provide the solution to the bankers. So when we go to an individual affiliate they can provide us with the individual asset class investment view and the product idea.

This market is therefore very fast paced, the environment changes frequently and it is rather complex, with so many countries at different stages of growth

Alongside this we also have a small cap dedicated manager, a large cap dedicated manager, and one of our largest affiliated fix income managers. In order to provide the best investment opportunities, we are committed to delivering the message from the investment professionals of Legg Mason, to all the bankers around the world.

World Finance: Lennie, from a regional perspective now, is there any notable difference in how your team meets clients’ needs across Asia?

Lennie Lim: We are unique in the sense that we are able to bring our multi-affiliate model to our Asian clients, and with this some of the best-of-breed managers that we have within the Legg Mason fold. My clients deal with a single point of contact on client service, and that’s true of all of us. And therefore my responsibility to ensure we bring a high level of client service to our clients, that’s able to deliver the investment objectives of our clients.

World Finance: Freeman, what trends do you see arising in Hong Kong and China, and how do you think this is going to affect the industry in the coming years?

Freeman Tsang: I would say there is going to be more integration between country and country, like the ASEAN Passport in Southeast Asia, and in north Asia between Hong Kong and China we will see more mutual recognition. This will mean that more funds can be brought forward to China from the Hong Kong registration perspective, or vice versa.

For us, more integration means more opportunity, and when we deal with that, we do see more opportunity, if we can provide a solution. In terms of trends in product development, it’s one of the key trends for Asia, because Asia is a low interest rate, high inflation environment.

Investors are looking for high-income products. Previously, during the crisis, they were looking for stable income. But after the crisis, they’re looking for high-yield fixed income.

Nowadays, we are seeing that they are more willing to take more risks, but they still want that income. So as a service provider when we talk to our bankers or distributors, they do need some kind of income theme but with the equity theme. So we do see a trend developing of people looking for more income but with a higher risk element.

World Finance: Freeman, Lennie, thank you.