First State looks to build diversified model in its second century
The Commonwealth Bank of Australia, the parent bank of First State Investments, celebrates 100 years of history this year. A series of mergers and acquisitions – and some dissolutions – has resulted in Australia’s largest bank by market capitalisation, and within it, one of the fastest-growing and most forward-looking global asset managers.
Within Australia, the brand is known as Colonial First State Global Asset Management. Abroad it is the more manageable First State Investments, whose ancestor back in 1871 was the Government Savings Bank of New South Wales.
Many manifestations later, the Australian group boasts international offices in Hong Kong, Singapore, Jakarta, London and Paris. A formal presence in New York is likely very soon. But it is the business approach, with depth and focus on just a few areas that marks out First State’s style.
First State Investments funds are organised by sector, including equities, debt, listed and unlisted property, infrastructure, agriculture, and most recently global credit.
“The model for both the business and investing has served us well,” says managing director Kanesh Lakhani. “We want to invest in uncorrelated or low-correlated assets, diversified by client type, and active and specialist by investment style.”
‘Wholesale’ or ‘institutional’
Clients are broadly classified as either ‘Wholesale’ or ‘Institutional’. Wholesale encompasses buyers serving all types of platforms, banks, wealth managers or discretionary managers. The Institutional business covers pension and insurance funds, and the biggest sovereign wealth funds.
“We are well represented in both segments, with a 50/50 split,” says Lakhani, who joined in May 2011 from State Street Global Advisors to head First State’s EMEA institutional and wholesale business. “We aim to grow both sides because the way we manage and invest is applicable to both segments.”
Such a strategy also immediately gets rid of the lingering suspicion among smaller clients that the bigger players get better deals.
First State runs only active strategies, but retains a conservative approach to asset management.
“We focus on wealth preservation,” explains Lakhani. “We are not unduly concerned about benchmark weightings. Clients understand this, and we are careful who we take on, because there will be times when performance deviates from the index because we are very active.”
“In up markets we tend to lag the index a bit, but when markets fall, our funds typically don’t fall as much. That makes it is easier to talk to investors, and for them to stick with us when we are outperforming about 80% of the time.”