00:08
2022 marks State Street's 40th anniversary in the APAC region. In 1982, the Dow Jones opened at 875, the NASDAQ at 195, a great British Pound would buy you $1.88 and China's GDP was less than 50% that of France. 1982 was a very, very, very different year indeed. To mark the 40th anniversary of that milestone, State Street is looking back and forward, back at some of the evolutions and innovations that have driven the industry over the past 40 years, and forward to what a glimpse of the future might look like.

00:53
Throughout the past 40 years, PIMCO has played a leading role in the evolution of the asset management industry. Since its foundation in 1971, the firm has created innovation and pushed boundaries on behalf of delivering better outcomes for its clients. As testimony to its success, the firm now manages over $1.8 trillion in assets. That's $225 for every single living person on planet Earth. PIMCO is a true industry giant. I'm delighted to be welcomed here today, Peter Strelow, Global Co-Chief Operating Officer of PIMCO and Chee Yang Lam, Head of Trade Operations and Support for Asia. Gentlemen, welcome. Thanks for having us. Thank you. So Peter, if I can start with you, 20 years ago, PIMCO started on its outsourcing journey when it outsources middle and back offices. Today, that's quite common practice. 20 years ago, that was a landmark decision. Maybe you could talk about what drove that decision.

01:51
Yeah. So I joined PIMCO over 20 years ago now, but about two years after this outsourcing to State Street Investment Management Services (IMS). And what's driven that change it still holds true today, which is we want to focus on investment management and client service and we wanted a partner that was going to be dedicated to making sure that they could drive the operations and technology for us.

02:13
20 years ago, PIMCO took the landmark decision to outsource middle and back. And I'm guessing that's a decision that you're happy with, because you've chosen to keep those operations that are on an outsourced basis. Maybe you can talk about the tangible benefits of outsourcing to PIMCO.

02:26
Yeah, I think it's been a really successful partnership. And we've achieved what we wanted to get out of it, which is we have been able to focus on investment management, we've been able to focus on servicing our clients. And a little more specifically is, you've really helped us with the global growth and with speed to market, helped to reduce some operational risk and operational complexity.

02:46
Okay, so if we fast forward from 2000, to 2021, PIMCO’s track record of innovation continues. And in 2021, you set up with partners like Microsoft, ourselves, Markit, a new FinTech called HUB, which as I read, it is a desire to rebuild the tech stack for asset managers. So maybe you could just give us a bit more information about the initiative and your plans for it.

03:09
Yeah, absolutely. We're really excited about what HUB can bring in terms of servicing the middle and back office functions. So it's designed by asset managers for asset managers. And it's not only looking at the tech stack, but it's also looking at processes and driving standardization. So this all kind of comes together from that standpoint, the technology platform is definitely state-of-the-art. You know, it's scalable, it's data-driven, it's cloud-based. And the services that we’re focused on includes data management, client service, client reporting and post-trade management.

03:46
Okay, thanks, Peter. Maybe if I can turn to Lam-san, it's received wisdom these days that to be a great asset manager, you have to be a fabulous master of data and technology. And particularly as we see the world where more processes are being digitized, portfolios are being digitized and assets are being digitized. Maybe you can talk about the digital journey at PIMCO.

04:08
Thanks. From a APAC regional perspective, I would say, you know, the focus that we have in this region, digitization is a very important focus for us. The local nuances, what we are seeing here is, and this is from a positive perspective, the growth that we're seeing in this region, the number of instruments, the number of markets that's opening up to international investors, but at the same time, it also poses as a challenge. We see it positively as, as an investment manager partnering with the right counterparties, we will be able to access to these markets better, but that means a lot of work to do. I think we are still at the start for certain markets. We are still at the early stage of finding the market consensus of what's the right protocol. So once that is confirmed, then I think we are going to the next stage where digitization will help us and allow us to have scalability.

05:01
So Lam, I guess it would be remiss of me not to touch on China in any conversation about Asia. It's a huge marketplace, it's growing rapidly, it has a pension marketplace with unparalleled demographic challenges. So I just wanted to understand perhaps how PIMCO is thinking about the opportunity in China.

05:20
Yes, I think there's two parts of it. One is from a fund distribution, and one is from a trading access into China risk market. From my perspective, I will talk more on the fund trading perspective. For the Global Inclusion, Global Bond Index inclusion of China since 2018, what we have seen is really access into China through the onshore channel, China CIBM Direct Access, or a lot of other investors are using the Bond Connect through Hong Kong. For PIMCO, we are very focused, ensuring that we have both channels, so that we can, you know, make sure that our clients have the best options. That comes along with some funding, I would say, again, challenges and opportunities that we, you know, continue to work with other market participants in terms of cut off, in terms of pre-funding requirements, and, you know, continue on dialogue to make sure that we will continue to build up the access for the clients. The other part that I will also mention is China onshore deliverable forwards, which is what we think that will be a very important tool for us to be able to access and also hedging our risk exposure better from a currency perspective. So this is one of the instruments that we're working very closely on.

06:35
So Peter, if I can turn to you finally, the partnership that we've had over the last 20 years has been one driven by innovation, maybe you could give us some clues as to where you see the next 20 years?

06:46
Well, I mean, our clients are driving us now across markets, across different asset classes in different vehicles. And so we've never really seen this level of pace of change. It just continues to get faster and faster. And we're also at unprecedented levels of investing in technology and technology development. So I think what we're looking for from our key partners are for them to bring the absolute best operators and technologists to the table to partner with us so that we can continue our global growth.

07:17
Thank you, Peter. Thank you Lam. We at State Street very much look forward to the next 20 years of partnership with PIMCO. Thank you Neil. Thank you.