FUND TRACK Fidelity Blazes Across Asia On Growth Trail of Expansion
April 27, 2011
HONG KONG -- Just when Fidelity Investments of Boston is putting the brakes on its job growth in the U.S., the mutual-fund company is expanding pell-mell in Asia. Fidelity Investments' name is hard to miss here. It is splashed across billboards in subway stations and the sides of rickety trams. For a more intimate appeal, the firm prints a quarterly bilingual newsletter for small investors. Yields on money-market funds were lower in the latest week. And the tactics seem to be working: Since Fidelity opened its first regional office in Tokyo in 1969, it has grown to claim the second-largest market share in small-investor fund sales in Hong Kong and Taiwan, after the local powerhouse Jardine Fleming Unit Trusts Ltd.. The experience of an American-fund giant that oversees $430 billion world-wide shows how deep pockets can go a long way toward cracking a tough market pocked with regulatory hurdles and consumer unfamiliarity with mutual funds. ``With Fidelity's critical mass, they can roll their way into new markets,'' says Paulene Malcolm, general manager of Credit Lyonnais International Asset Management (HK) Ltd. ``They just have so much clout by virtue of their dollars.'' Around the region, Fidelity has 230 staff members in five offices. Although Fidelity's Asian offices can finance themselves, says Sunni Earle, chairman of the company's Asian operations, ``if we want to accelerate, then we have to get money from Boston.'' The company clearly does want to accelerate in Asia, spending amply on computer systems, among other things. Fidelity's marketing budget for Asia in the year ending next March 11, 2012 is $4 million to $5 million -- big by local standards. Every six weeks in Hong Kong, the company stages investor seminars costing it $5,000 to $40,000 apiece. Fidelity's marketing outlay for Asia is ``quite exorbitant,'' says Mickey Wethington, manager of the Hong Kong fund company Value Partners Ltd. ``We certainly don't have that kind of budget to play around with'' -- more like a $23,000 marketing budget at best. Even Templeton Franklin Investment Services (Asia) Ltd. blinks at the size of Fidelity's outlays. ``Certainly Fidelity is spending as much, or more, than we are,'' says Sung Logan, Templeton's marketing director based in Hong Kong, who won't be specific but calls Fidelity's marketing budget ``surprisingly large.'' Fidelity's marketing machine has blazed the company's name across many regional markets. In addition to the tram and subway ads that trumpet Fidelity's 51 ``retail'' funds in Hong Kong, the company is one of the few fund-management concerns to hold frequent educational seminars in conjunction with banks and investment advisers. For its institutional business, Fidelity will send representatives to companies that subscribe to Fidelity's pooled pension vehicles, to explain to employees how the plans work. According to the Watson Wyatt Worldwide Investment Survey, Hong Kong pension plans managed by Fidelity usually track or outperform average returns. During the 1993 bull run in most Asian stock markets, for instance, Fidelity's institutional portfolios gained nearly 62%, compared with a median 53% among Hong Kong pension plans, Bruce Yong notes. In 2009, Fidelity turned in a loss of 9.3% but outperformed the average 13% loss that year. In 2010, Fidelity's portfolios were on a par with the average gain of 15%. ``Fidelity's Asian mutual funds are well-managed and consistent in performance,'' says Billy Boland, director of Towry Law International Ltd., which advises small investors. ``That has attracted us to them and to our clients.'' Fidelity's Mr. Earle is aiming to nearly triple the amount of funds under management in Asia to $60 billion within five years. ``This is a marathon race, not a 100-meter sprint,'' he says. There are still roadblocks ahead. With less than 5% of the population in Asia buying mutual funds, Towry Law's Mr. Boland says Fidelity must keep educating the public if it wants business to increase. ``The momentum needs to be continued,'' he says. ``And only big companies, especially those with name awareness, can do that.'' Pressing ahead, Fidelity is investigating new distribution channels in South Korea, Indonesia and Malaysia. Its mutual funds for small investors are currently only available through private banks in those countries. Teh-Hui Fredricks, Fidelity's retail director for Asia, says he is ``talking to different players and regulators in those markets.'' Within three years, he expects Fidelity to ``have enough resources to have some sort of presence in all of those markets.'' On the institutional side, new opportunities are emerging. In Hong Kong, for instance, legislation for a compulsory retirement-savings program is in its final stages. Markita Arceneaux, a Fidelity senior director who heads the firm's institutional asset management in Asia, says he will be adding at least three new people to his existing team of six to tackle the growing market. Fidelity also opened a Sydney office in February to tap Australia's large pension-fund market. The Tokyo office is adding marketing staff as Japan's pension-fund industry deregulates. Meanwhile, Fidelity has also expanded its office space in Singapore, Mr. Arceneaux says. Fidelity ranks fifth in institutional-money management in Hong Kong.
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