Published by Asia Asset Management – 5th Sep 2017
Singapore’s Fullerton Fund Management (Fullerton), controlled by Temasek Holding, the city state’s sovereign wealth fund, would become one of the largest asset managers in Southeast Asia if speculation of its merger with NTUC Income becomes a reality.
Last week, several financial publications reported on a possible merger between the two Singapore companies, citing unnamed sources.
According to August 31 media reports, Fullerton will take over management of insurer NTUC Income’s public market portfolio, estimated at about S$26 billion (US$19.2 billion), or 80% of the latter’s AUM of S$32.9 billion as at end-2016.
Fullerton’s AUM stood at S$16.5 billion as at end-March 2017. So their combined total AUM would exceed S$40 billion, close to Lion Global Investors (LGI), which is among the largest asset managers in Southeast Asia. LGI, a subsidiary of Singapore’s Oversea-Chinese Banking (OCBC) Group, had AUM of over S$45 billion as at end-June.
Asked about the reported merger, a spokesperson for Fullerton tells Asia Asset Management (AAM) that the company does not comment on speculation.
A spokesperson for NTUC Income did not immediately respond when asked for comment.
Industry observers say a merger could help NTUC Income leverage on Fullerton’s expertise to grow its funds, and save costs if it involves downsizing the existing investment team.
More than half of NTUC Income’s funds registered declines in their values in 2016, according to the latest available data from the company.
As for Fullerton, the merger is expected help the company grow its fund size, boost income, and attract more clients through lower fees.
This is important as fund management companies globally are under pressure to lower their fees. According to a study released by Morningstar in May, the average expense ratio paid by investors in 2016 fell to 0.57% from 0.61% in 2015, and 0.65% in 2014.
“Today, competition in the fund management industry is getting more intense. The merger, if it materialises, could give Fullerton Fund Management better economies of scale,” Edmund Tham, head of research at Mercury Research at Kuala Lumpur tells AAM.
