This is in terms of designing and distributing new equity and fixed income funds that invest in the companies and governments of those regions as well as fund houses building up a greater physical presence.
Henderson Global Investors, for example, announced in May that it is building a brand new fund management business on the other side of the world from its current core.
But the pace of expansion has picked up in the past few months so why now?
Admittedly – now and for the next decade or more – there is far more scope for new funds and more offices in Hong Kong, Singapore, Australia, Central Asia and some of the growing frontier markets given their relatively low concentration levels compared to the saturation of UK, US and European funds and firms in the UK, US and Europe.
Other reasons can broadly be split between the lack of opportunities in the traditional markets and the increase in opportunities elsewhere.
The former category includes the economic, social and political problems in the eurozone, worries about the slowdown-rather-than-growth of the US economy and the threat of a double-dip recession in the UK. These can now be measured in years not months without a concrete solution being put in place – the PIIGS acronym was first used in 2008 yet very little has changed economically – politically and socially, yes – since then.
As soon as there is saturation in one area the natural reaction is to look elsewhere. There are some firms that are well-established in these areas already (First State, Aberdeen, Franklin Templeton and others, who all followed Barings into Asia after 1973); there are others that have been there for just two or three decades (Invesco Perpetual, Pioneer); there are the more recent entrants (Liontrust through its acquisition of Occam in 2011); then those that have no presence there at all (Cazenove Capital).
I am not for a minute suggesting that the only way for Cazenove and others in a similar position are going to struggle unless they open offices globally but given the level of activity seen in just the past few months suggests that many others are looking to do exactly this.
Investors will see a gradual lowering of their UK/US/Europe exposure, equity and fixed income, in favour of securities from other countries.
In the same way that Arsenal were pilloried for being the first Premier League team to field a non-English starting eleven (v Crystal Palace in February 2005 – they won, 5:1), they have been a top-four team before and since.
So good management decisions can lead to solid long-term performance despite what taking what might originally be seen as a fairly contrarian [stock] selection decision.
