AXA Investment Managers, the fund management arm of the French insurance company, has traditionally avoided the retail market in Asia, preferring to focus on pension funds and other institutional investors. But a new class of affluent investors in China and India is prompting a change in strategy.
AXA Investment Managers Asia, the group’s $67 billion-in-assets Hong Kong–based subsidiary, has simultaneously launched mutual fund joint ventures in the two countries in recent months. The timing is far from ideal — China’s benchmark CSI 300 index has plunged by 58 percent since its record high in January, and the Bombay Stock Exchange 30 index has dropped 38 percent — but the French company is confident of the long-term potential of both markets.
AXA has raised $200 million in China since launching a domestic equity fund in February in a venture with Shanghai Pudong Development Bank Co. In India, where AXA has teamed up with Bharti Enterprises, the company has raised $150 million since introducing three fixed-income-oriented funds in June.
“Both markets are way down, but we were still able to raise reasonably sizable funds,” says Anthony Fasso, the Hong Kong–based CEO of AXA Investment Managers Asia. “In China, we would have raised more than $1 billion last year when the markets were booming, but perhaps we would have gotten complacent. Hopefully we’re learning our lessons right up front.”
AXA chose the joint venture route because both countries forbid foreign firms from setting up wholly owned operations or managing pension money.
In China, AXA selected as its partner Shanghai Pudong Development Bank, the city’s largest bank. The institution “is a fast-growing bank with pan-China aspirations, a listed bank with strong corporate governance [that] is interested in cooperating with international shareholders,” Fasso explains.
AXA provides advice and technology to the venture, called AXA SPBD Investment Managers Co., but it holds only a 39 percent stake and no management rights. The new outfit distributes its funds primarily through the giant branch network of the country’s largest bank, Industrial and Commercial Bank of China. Shanghai Pudong owns 51 percent of the business, and the remaining 10 percent is held by Shanghai Dragon Investment Co. Both entities are controlled by the Shanghai city government.
In India, AXA chose Bharti, which runs Bharti Airtel, the nation’s No. 1 mobile phone service provider, as its partner, even though the venture marked the company’s first foray into finance. “The group is often voted the most admired company in India,” Fasso says. “We were impressed with its ability to tap into the minds and needs of the Indian consumer.” AXA owns 75 percent of the venture, Bharti AXA Investment Managers, and exercises management control.
Bharti AXA IM has already set up 32 retail outlets in 25 Indian cities. In addition to providing fund management, AXA has established ventures with Bharti that sell life and general insurance.
“I definitely see our brand being quite visible, which is a big advantage in this country,” says CEO Sandeep Dasgupta. The venture aims to raise as much as $10 billion in assets by 2012. “The asset management industry has been growing by 35 percent to 37 percent per annum,” Dasgupta says in a telephone interview from Mumbai, where the venture is based. “I’m confident, given the very young household age in this country and [the fact that] only 1 percent of households own mutual funds, that more and more households will buy mutual funds.”
The retail enterprise is a departure for AXA in Asia, but the company plans to launch more funds in both markets if its initial forays are successful, Fasso says.
“We’re doing this through a long-term initiative, trying to get into a market relatively early,” Fasso says. AXA also hopes the ventures will help it “better understand the global impact of these markets over the coming ten to 20 years. One way to better understand China and India is to have an operation in these markets.”
The demographics of both markets are certainly enticing. China has some 500,000 U.S.-dollar millionaires and India has more than 100,000, according to the Cap Gemini Merrill Lynch wealth report. “The rising wealthy class, and the lower class becoming middle class, is an attractive trend in both nations,” notes Fasso. “We can’t help but notice that there are increasing asset pools in both India and China.”
