'Emerging marts resilient to sub-prime'

Q&A: Angus Stening

Pioneer Investments Management recently signed a joint venture agreement with the public sector lender, Bank of Baroda (BoB), to pick up a 51 per cent stake in the existing Bank of Baroda Asset Management Company. Angus Stening, CEO, Asia and emerging markets, Pioneer Investments, spoke to Priya Nadkarni and Palak Shah about the company's business plans in India and the emerging markets. Excerpts:

What is the latest update on the regulatory approvals for the AMC business?

We are in the process of submitting the regulatory filings with both the Sebi and the Bank of Italy, our regulator in Italy.

Do you have any plans to start an offshore fund targeted at Indian investors?

We are keen on drawing our global experience and presence for this venture. We will indeed bring this global expertise to the Indian investor in the form of a product which allows him or her to invest overseas.

In the same vein, we are keen to take the India story to our international client base, composed of institutions, HNIs, corporates and trusts and will devise a product leveraging the India JV capabilities.

Do you see any bubble building up in the emerging market equities?

We remain positive on the outlook for the emerging market (EM) equities. Although this asset class is entering its sixth year of outperformance compared with the world equities, valuations are not yet expensive on a historic and relative basis, especially in the light of a much higher growth potential at the earnings level.

During the past summer, developed equity markets suffered from the US sub-prime crisis and the issue is still shaping world equities as they have yet to recover fully from their early losses. In contrast, EM equities proved particularly resilient in the turmoil and rebounded sharply.

In fact, EM valuations are underpinned by strong earnings growth and may simply warrant a re-rating through multiple expansions based on the underlying strength of their fundamentals.

What is the allocation to India in all your funds? Have you increased it recently?

Our funds are not available or permitted for sale in India. So the information is only for illustrative purposes. We have two funds in our range, where exposure to the Indian market is common.

In the EM equities, there is an approximately 4 per cent allocation and in the Pacific ex-Japan, almost 8 per cent of the weightage in given to India. These allocations have been stable in recent times.

Have any of your funds seen any redemptions as a fallout of the sub-prime crisis?

It has been true for almost all asset managers that funds in their range, which may be connected to investment strategies related to the credit crisis, have been subject to redemption. We are no different and we understand this reaction from investors, who are nervous of the recent events.

What kind of products are you looking at rolling out once you get all the requisite approvals? How are you going to incorporate BoB's existing schemes into the new venture?

We are in the phase of consolidating and rationalising the existing funds range. At the same time, we will be launching new funds into the market, details of which will be released in the near future.