NEW YORK — Scores of executives talk about globalization, but lately Ronald O’Hanley seems to be living it.
Last month alone, Mr. O’Hanley, president and chief executive officer of BNY Mellon Asset Management, New York, completed deals to form a joint venture money management business in China and acquire an asset management company in Brazil — while also managing to fit in a tour of the Middle East and visit with several major institutional investors.
Mr. O’Hanley, in an interview, describes the recent activity as the “third generation” of the $1.1 trillion money management company’s growth strategy, one that is now shifting more toward establishing BNY Mellon Asset Management in rapidly developing emerging markets.
“Many of the world’s emerging markets have evolved well beyond the point of just being interesting investments,” said Mr. O’Hanley. “They are real economies with a real creation of wealth, and they present very real opportunities.”
BNY Mellon has focused much of its non-U.S. expansion on distributing its affiliates’ existing investment strategies in various established foreign markets, such as the U.K. and Japan, its “first generation” approach to globalizing the business.
BNY Mellon then moved on to the second generation by customizing its strategies in foreign markets “where it makes the most sense,” Mr. O’Hanley said. One example: a global long-short product the company developed several years ago specifically for the Australian market.
While these two generational approaches have resulted in impressive contributions to the company’s bottom line — non-U.S. business now accounts for 34% of asset management revenues, compared with 16% in 2003 — Mr. O’Hanley is positioning the asset manager for even more considerable growth in foreign markets over the next decade.
One of the few
The company just closed a deal in China to form a joint venture fund management company with Western Securities, a Xian-based securities firm. BNY Mellon will own a 49% stake in the venture — BNY Mellon Western Fund Management — and is among fewer than 30 such joint ventures in the Chinese fund management industry.
The move will allow BNY Mellon to tap into China’s retail money management market, which has grown rapidly, particularly over the last year. At the end of the third quarter, the Chinese fund management industry — which now consists of about 60 domestic and joint venture fund managers — saw combined assets under management hit an all-time high of 3.1 trillion renminbi, a roughly 460% increase over a one-year period, according to a November report from Z-Ben Advisors Ltd., Shanghai, a money management consultant.
BNY Mellon also aligned itself with a domestic Chinese money manager, China Southern Fund Management Co. Ltd., which tapped BNY Mellon to subadvise on a qualified domestic institutional investor fund (a fund that permits Chinese investors to invest outside the country.) When the fund was launched in September, it was quickly capped at $4 billion after receiving more than $8 billion in subscriptions from Chinese investors.
“The strategy in China right now is to create options,” Mr. O’Hanley said. “It’s too early to say exactly how you will succeed in the country over the next 10 years, so we’re doing multiple small- to medium-sized projects to best position ourselves.”
Shortly before the joint venture in China was formalized, BNY Mellon inked a deal to acquire an asset manager in Brazil. The company agreed to purchase ARX Capital Management LLC, Rio de Janeiro, which runs roughly $2.6 billion in multistrategy, long-short and long-only alternative investment strategies.
The deal will give BNY Mellon a better opportunity to expand in Brazil, where it currently runs close to $8 billion, largely in fixed-income assignments for institutional investors. Mr. O’Hanley said many of Brazil’s institutional investors are looking beyond fixed income to increase their investment returns and are evaluating the use of alternative and equity investment strategies.
Brazil’s asset management industry has grown at an impressive clip — 27% annually for the last five years, according to a joint study from the Investment Company Institute, Washington, and the Associacao Nacional dos Bancos de Investimento, Rio de Janeiro.
And while the ARX acquisition will position BNY Mellon to compete for business in Brazil, Mr. O’Hanley pointed out that the deal will also allow the company to expand and export ARX’s local expertise to BNY Mellon clients interested in investing in Brazilian markets.
Focused on Middle East
Mr. O’Hanley said the Middle East is also becoming an important asset management market, one in which BNY Mellon has focused for several years.
He said there are a growing number of opportunities to work with the sovereign wealth funds in the region, such as the Kuwait Investment Authority and the Abu Dhabi Investment Authority. These types of investors “are some of the most sophisticated in the world,” Mr. O’Hanley said, and he likens them to the sharpest endowment and foundation investors in the U.S. He added that many of the sovereign funds are now looking at opportunities to invest in other foreign markets such as Asia, and are evaluating various ways to implement alternative investment strategies.
The assets held by these sovereign wealth funds are enormous, according to an October report from McKinsey & Co., New York, which estimated such funds have $2 trillion to $2.3 trillion combined.
