Amid strong headwinds, including a global pandemic that is reshaping the asset management industry, $148 billion First Sentier Investors is expanding into the hyper-competitive U.S. markets.
With capital from parent Mitsubishi UFJ Trust and Banking Corp, First Sentier is focused on making specialized investments it already runs available to U.S. investors and going after inorganic growth through domestic lift-outs or acquisitions of new investment teams, CEO Mark Steinberg said during a video call from his home base of Sydney.
Last month, the firm changed its name from First State Investments, the brand under which it was acquired in August 2019 by Japanese giant Mitsubishi. The firm has already been using the Sentier name, which means path, in Australia.
Steinberg, who had been the firm’s chief financial officer during the global financial crisis, returned in 2017 after three years as CFO of an insurance business. His mandate at the time was to take the asset manager public under its previous owner, the Commonwealth Bank of Australia. After that plan was abandoned, Mitsubishi bought it.
According to Steinberg, First Sentier didn’t have access to capital to expand under its previous owner, which considered the business “non-core.” Instead its cash profits were invested in other divisions of the bank.
Under Mitsubishi, that’s completely changed, Steinberg said. “They have a long-term strategic view” to increase the footprint of the global organization, expand outside of Japan, and diversify revenue, he said.
As an active manager, Steinberg said First Sentier is choosing its spots carefully. For example, it’s offering global listed infrastructure and direct infrastructure, Chinese equities, and other Asian equities investments to U.S. investors.
Bachar Beaini, New York-based managing director of the Americas, told Institutional Investor that the firm will look to market a high-yield debt strategy it has been incubating. Beaini added that the firm won’t go into areas in the U.S. where it can’t strongly differentiate why it’s there. “It’s saturated,” he said.
Steinberg said that even in markets where the manager is better known, it takes a niche approach, including offering emerging markets, global property, and small-cap Asian equities investments.
Other areas that First Sentier may enter include other alternatives, such as private credit, and investments that offer higher yields than plain vanilla fixed income can offer in a low interest rate environment.
Steinberg believes the firm’s global distribution capabilities will attract local investment teams, as well as more prosaic services such as middle and back-office systems. That’s because smaller boutique firms are facing daunting challenges to comply with a growing regulatory burden, he said. First Sentier invested in developing upgraded systems and operations during its first year under Mitsubishi.
Unlike some peer asset managers, Steinberg said that the pandemic hasn’t forced the manager to furlough any staff, shut down, or make other changes. Although the unit’s financials aren’t disclosed, Steinberg said, “We’re still profitable.”