FINANCIAL services giant Fidelity may demerge its proprietary investment arm Eight Roads, a prominent venture investor in South-east Asia, from its core business, the company announced in a June 11 regulatory filing.
Fidelity said that it may make the move “in order to better align the goals of the respective businesses with the incentives of their respective employee shareholders”.
“Any final decision is expected later this year and remains subject to further approvals, including regulatory and shareholder approvals,” the company added in the filing.
Eight Roads specialises in venture, real estate and principal investments. It has made over US$6 billion in venture investments since 2008, with funds in China, Europe, Japan, India and the US. Its associated funds in Asia include ClearVue Partners, Six Dimensions and Arbor Ventures.
An early backer of e-commerce giant Alibaba, Eight Roads has actively funded Asian startups, such as Indonesian fintech Akulaku and China's autonomous driving platform Pony.AI. In April last year, it took part in the US$2.87 million pre-Series A round of Singapore banking tech firm Silot.
Last year, Eight Roads opened its first South-east Asian office in Singapore. In an interview with The Business Times, Raj Dugar, managing partner for Eight Roads Asia, said that the firm is focusing on Series B, C and D funding in South-east Asia and India, with cheque sizes ranging from S$10 million to S$25 million.
Eight Roads' demerger would be a credit-positive move for Fidelity as it would “reduce earnings volatility and balance sheet risk while improving financial transparency”, Moody’s Investors Service said in a June 13 report.
Despite contributing to Fidelity’s profitability over the past five years, Eight Roads has been a source of exposure to market volatility and balance sheet risk, according to the report.
“Eight Roads’ focus on illiquid assets has also increased FIL’s exposure to market value fluctuations that have affected Fidelity’s earnings performance...the demerger will also improve FIL’s financial transparency and clarify its strategy, a further credit positive,” Moody’s added in the report.