AsianInvestor Magazine

Issue: December 2014

Issue: December 2014

Connecting with Asia
Reflect on the key trends across the asset management industry this past year and one stands out as universal: the search for yield. Beyond that, we have seen investors across the board diversify portfolios, to the benefit of the alternatives industry above all (see page 22). A convergence between long-only and alternative managers has unfolded, with each side extending further into the other’s territory to build scale.
The year has also witnessed a turning of the tide for Asian emerging markets following the headlong investor exodus last year. That capital flight was sparked by Ben Bernanke raising the prospect of the US Federal Reserve tapering its largescale asset purchasing programme in mid-2013. Still, at least the ensuing taper tantrum helped to clear out much of the hot money, leaving longer-term investors with a large share of the pie (see page 34).
When you consider that developed markets have not rebounded as many expected – several wise heads started this year thinking a 10-year US Treasury yield of 3% was achievable, but it hasn’t happened – the growing maturity of emerging markets is catching the attention of the region’s asset owners. Their interest is becoming more granular by market, as opposed to a broad EM bucket. More fund managers are responding by basing global emerging market managers in Asia for the first time. You can expect that trend to continue.
How to crack the China market has been another constant throughout the year, and that isn’t going away either. The latest announcement was the launch of the Shanghai-Hong Kong Stock Connect scheme, allowing international investors direct access to A-shares for the first time and giving mainland traders a leg-up into the H-share market. But what characterised its opening week was the lack of trading (see page 12). Investors had been given just a week’s notice, with the problematic issue over capital gains tax not clarified until the last working day before launch. The result was global long-only managers being notably absent, with activity driven by hedge funds. Legal creases remain in need of ironing.
Certainly fund managers and service providers will be hoping for more than a week’s grace to prepare for the launch of Hong Kong-China mutual recognition scheme, expected before the end of the first quarter 2015. The chance to reach out to 1.4 billion new customers is not to be sniffed at for international fund houses whose margins have come under increasing pressure (see page 26). Policymakers will need to provide as much clarity as possible if the scheme is to get off to a more auspicious start than Stock Connect.
There are two takeaways for investors: it’s best to take a long-term view on Asia, and always be prepared. Rome was not built in a day, after all.

Leigh Powell

This Month
On the move

04    Allianz names new insurance CIO; Nikko AM adds senior trio; GAM restructuring sales team

10    Regulatory Analysis
        Insurance firms in Hong Kong face a regulatory clampdown with wider industry         implications

11    Regulatory Roundup
        China releases RQDII rules; Australia gets Rmb50 billion quota; Taiwan-Singapore             stock-trading link set for 2015

12     Data Centre
         A summary of early trading on the Shanghai-Hong Kong Stock Connect.

Asset Owners
14    The architect of good governance
        Chief executive Adrian Orr has instilled an unshakeable adherence to best practice at New Zealand Super Fund

20    Q&A: Matt Whineray, CIO of NZ Super

22    Insurers shift gears in diversification drive

24    China Life mandates reflect allocation trend; Ontario Teachers boosts equities team; HKMA            names allocation head

26    The 1.4 billion (dollar) question
        With mutual recognition for funds set for launch, global asset managers must learn what makes the Chinese population tick

30    Q&A: Henry Lee, Asia-Pacific head of mutual funds and discretionary business for HSBC        Private Bank

32    AMP-China Life deal viewed as pacesetter; Bank of Singapore replaces CEO, loses fund         selection head

Fund Managers
34    EM carry trade tipped as best bet
        Conventional thinking on global bond markets has been spun on its head. It’s emerging market debt that offers long-term appeal

38    Roundtable: Putting the smart into beta

44    Fund managers are setting up wholly foreign-owned enterprises in China

48    Why Indian investors need more incentives to buy mutual funds

52    Legg Mason eyes new Asia markets, HK buildout; managers lobby on mutual recognition

Alternative Investments
54    Return to normality?
        Hedge fund managers expect volatility to re-emerge after the tapering wind-down, creating a ripe environment for stock-pickers

58    Q&A: Rahul Chandra, Helion Venture Partners

60    Oaktree focuses on Asia distressed debt, property; CIC, Illinois Teachers eye cross-border deals

Asset Services
62    Asian regulators ‘not soft’
        The region’s watchdogs are described as tough on rule breaches, with smaller fines not seen as reflecting weakness

63    Operations manager: Michael Marquardt, BlackRock

64    Trader talk: Monica Tan, Lion Global

65    Managers hopeful for Stock Connect despite slow start

66    Fund selectors identify key factors for future
        The need to get to know clients and ease of delivery are differentiators in the race to tap Asia’s burgeoning wealth. Digital will be key for both, hears AsianInvestor’s inaugural Fund Selectors Forum Asia

68    Bookend
       American Power After the Financial Crisis, by Jonathan Kirshner

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December 2014 Magazine
AsianInvestor Magazine

What's in this issue

NZ Super: guardians of governance
Asian insurers on diversification drive
China's 1.4 billion (dollar) question
End of the EM carry trade?