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.
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.
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
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
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
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
American Power After the Financial Crisis, by Jonathan Kirshner