IN a move to scale up its asset management business, Keppel Corporation is planning to consolidate its interests in all asset management companies under one umbrella.
Under the restructuring plan, its fund management arm Alpha Investment Partners and the trustee managers of Keppel Reit, Keppel DC Reit, and Keppel Infrastructure Trust will be grouped under Keppel Capital Holdings, the group's wholly owned subsidiary.
Announcing the plan on Monday, Keppel Corp said it expects the integration to be achieved in the second half of this year, subject to necessary approvals.
Group CEO Loh Chin Hua told analysts and journalists that this is more than just a move to ramp up recurring management fees amid the doldrums of the oil and gas sector. Rather, the benefits are multi-fold.
First, this will strengthen the group's capital recycling platform to unlock value and allow "greater velocity for new vehicle launches", which could be private funds or listed trusts. "We also look at this as a way to expand the capital platform for co-investing," Mr Loh said.
Many sovereign wealth funds and pension funds are looking for partners to invest in assets such as power plants and data centres - assets that are not so readily available in the open market. Keppel Corp is actively involved in building real estate and infrastructure assets amid a lack of comparable companies that straddle between these asset classes.
Currently, the group's asset management businesses are dispersed across different business units, with Keppel Infrastructure Fund Management under Keppel Infrastructure, Keppel DC Reit Management under Keppel T&T, and Keppel Reit Management and Alpha under Keppel Land.
With the proposed consolidation, Keppel's shareholdings of the trustee managers and Alpha will come under Keppel Capital. There is no change to the unitholdings in the Reits, business trust or investments in the funds. Their existing management teams and boards of directors will also remain intact.
This integration creates an expanded capital base to fund new projects without straining the group's balance sheet, Mr Loh said. He stressed that the ability to allocate capital across the different segments is critical for a multi-business conglomerate such as Keppel Corp, whose property fund investors are often potential investors of other asset classes too.
Keppel Capital will focus on property, infrastructure and offshore and marine sectors - areas where the group has a strong track record of creating and managing assets.
"If we ever go into new vehicles, they will be in areas of our core businesses, so don't expect us to go into equities or bonds," Mr Loh said.
Since 2006, the group's asset management businesses have grown by a compounded 30 per cent per annum from S$2 billion in asset under management to S$26 billion in fiscal 2015. They contributed S$60 million in management fees last year or 4 per cent of the group net profit that remained dominated by property and offshore marine contributions.
Keppel Corp said it plans to report its interests in the asset management businesses under a new consolidated reporting segment as part of its investments arm, making them more visible on its quarterly financial statements.
DBS research analyst Ho Pei Hwa likened Keppel Capital to a "gel that glue other segments together". She said: "With the consolidation effort, we do expect the synergies to yield some cost savings and greater contribution from investment segment."
Another analyst with a foreign brokerage noted that one can expect greater emphasis by the group in growing the asset management platform going forward. "Asset management fees is expected to grow significantly, as long as interest rates stay low and investors are still looking for yield."
Some cost efficiencies can be derived from centralising certain support functions and sharing of best practices, Mr Loh said. This enables the management of each Reit, trust or fund to focus on investment and portfolio management to yield better returns. The enlarged fund management platform is also expected to enhance recruitment and retention of talent.
Christina Tan, current managing director of Alpha, said the restructuring brings together the intellectual capacity of over 200 fund management staff across different entities. She will be appointed the CEO-designate of Keppel Capital, after helming Alpha since its inception in 2003 and growing its assets under management to over S$12 billion.
After the completion of the proposed consolidation, Keppel Corp may consider increasing the scope of Keppel Capital to include investments and asset management activities regulated by the Monetary Authority of Singapore (MAS). This expansion in scope would be undertaken after obtaining the necessary licences and approvals from MAS.