BNY Mellon zeroes in on asset management
Robert P. Kelly is still working out the details of the integration of Bank of New York and Mellon, which merged in July.
But the company’s New York-based chief executive officer told staff in China that he would visit the country at least twice a year.
"The (Asia-Pacific) region is huge. Though currently it only accounts for less than 10 percent of our total revenue, it is the highest growth area," Kelly says.
During his visit to China in mid November, Kelly said the company had accomplished a significant milestone – to finally own a joint venture fund management firm in one of the world’s fastest growing markets.
The new company, BNY Mellon Western Fund Management, is 51 percent-owned by local brokerage Western Securities and 49 percent by Bank of New York Mellon (BNY Mellon). It will be headquartered in Shanghai and is expected to launch in 2008, subject to regulatory approval.
The joint venture marks BNY Mellon’s first significant foray into one of the world’s fastest-growing asset management markets. And that market, Kelly told China Daily, is the group’s priority in China.
BNY Mellon wants to adapt its asset management experience for the local market via the joint venture, says David Jiang, CEO of BNY Mellon’s Asset Management Asia-Pacific.
The joint venture will initially manage domestic securities in a range of local retail fund products. Over time the firm plans to develop other products.
Its local partner, Xi’an-based Western Securities, has a ready-made distribution system – 34 branches and 20 securities services offices throughout the country.
The joint venture expects to nearly double its staff from the current 110 to 200 by next year, according to Andrew M Gordon, executive vice-president of BNY Mellon.
BNY Mellon has previous experience in the local asset management market. BNY Mellon Asset Management was among the first batch of foreign firms allowed to provide sub-advisory services to China’s qualified domestic institutional investment (QDII) funds.
The company advised the first QDII fund raised by China Southern Asset Management Co Ltd at a capped $4 billion in September. It was later appointed custodian bank for the fund.
The company is now custodian bank for four of the eight local fund managers approved for QDII.
The company’s custodian business is unique. The bank accounts for 65 percent of the American Depositary Receipt (ADR) custodian business in China, while Citibank, JPMorgan Chase and Deutsche Bank share the rest, according to Chen Qing, chief representative of Bank of New York’s Beijing office.
"Our business will focus on asset management and custodian banking here in China," Kelly says.
This business model has served BNY Mellon well so far. According to a McKinsey study last spring, BNY Mellon manages $21 trillion of the world’s total $140 trillion stocks and bonds.
"Specialization made BNY Mellon a market leader. And the pie is getting larger and larger," Kelly says.
"The merger of the two companies will not only let us maintain the current market share, but will help our revenue grow in each of our businesses."
Kelly tells China Daily he expects the integration of Bank of New York and Mellon will take two and a half years to complete.
"The asset management business will be done by January or February. The ADR and corporate trust businesses will have no integration since Mellon did not have the capability. The private banking will take at least a year in the United States."
The toughest task, Kelly says, is the merger of the asset services business, because the two companies use a similar system. But he says the merger will not affect the company’s business in China, even though it may result in the loss of 4,000 jobs globally.
"Here, we will continue to expand," the CEO says.