Arabesque eyes pension funds as it looks to expand in Asia

Arabesque Asset Management (Arabesque), a London-based boutique money manager, is looking to expand its presence in Asia, and is setting its sights on pension funds in the region.

The company, which specialises in environmental, social and governance (ESG) investments, had assets under management (AUM) of US$150 million as at end-2017. Most of its customers are family offices.

Arabesque Chairman Georg Kell says the company is looking at “securing mandates from Asian pension funds”.

“As an asset management firm that is very focused on ESG, we are in good position to capture the growth and demand for ESG investment by institutional investors and pension funds,” Mr. Kell said on the sidelines of a recent capital market conference in Kuala Lumpur.

He declined to disclose which Asian pension funds Arabesque is in discussions with.

A growing number of pension funds in Asia have begun to take ESG investments more seriously in recent years.

Japan’s Government Pension Investment Fund, which had AUM of $1.5 trillion at the end of 2017, said last year it plans to allocate 1 trillion yen ($9 billion) or 3% of its equities portfolio into companies that practice ESG.

In Malaysia, Kumpulan Wang Persaraan, the country’s second largest pension fund, hopes to have 70% of its AUM be ESG-compliant by an undisclosed timeline, up from the current 50%. The fund had AUM of over 137 billion ringgit ($35.22 billion) as at end-September 2017.

Mr. Kell says Arabesque, which was founded in 2013, needed a few years to build its track record before moving to expand aggressively.

“In this industry, you are pretty much non-existent until the third or fourth year onwards,” he says.

According to Mr. Kell, Arabesque will also be looking to grow its retail investor business. This will be done via partnerships with local players because it can be costly to set up a distribution network to reach out to retail investors.

“In Malaysia, we have a partnership with BIMB Investment Management. We are looking for similar partnerships in the region,” he says.

But he believes it’s important to educate retail investors about ESG products in order to boost demand.

“In Asia, their (retail investors) mindset is not open enough… Of course, we know that building something new is never easy. It takes time,” Mr. Kell says. “Nevertheless, I am confident that sustainable investing is here to stay and will become a new normal.”