Barings plans long/short multi-asset launch, hit by China turmoil

Baring Asset Management plans to launch a long/short global multi-asset fund this year, with recent international equity volatility underlining the potential benefits of a short component. Yet the recent Chinese stock-market turmoil has hit the UK firm's efforts to raise money for its new Hong Kong-domiciled multi-asset income product.

“We hope the [long/short] strategy will be launched this year under a Ucits structure domiciled in Ireland, with registration to allow distribution in various countries,” said Marino Valensise, global head of multi-asset. “The jurisdiction where the product is distributed and incorporated might have some impact on how we manage the money, but we do not expect this to be material.” He could not provide further detail as the product has not been approved.

Meanwhile, the multi-asset income strategy was one of Barings’ first Hong Kong-domiciled products, but the launch timing was unfortunate, as it came just before mainland stocks started to plummet on June 8. Barings is not alone in facing such challenges, with Franklin Templeton's mainland joint venture another example (see accompanying story on today's newsletter).

Getting products on retail platforms in Asia can take a long time in any case, due to the length of the due-diligence process, noted Sonja Laud, London-based portfolio manager of the Baring Global Multi Asset Income Fund. Feedback for the multi-asset income strategy has been very positive, she added, but banks have lately been more focused on the implications of events in China. 

Nevertheless, Asian demand for income is widespread, with every investor class looking for income, including institutions, Laud told AsianInvestor. While institutional investors tend to focus on total-return strategies, Barings is starting to see tentative interest in multi-asset income in Asia and the UK, especially from smaller pension funds. They are taking the view that the income stream can help them manage internal costs and fee structures, noted Laud.

Asked about the challenges of generating a decent level of income in the current environment, she said Barings had been selling covered call options on stocks in the portfolio. “This is a straightforward process that allows us to generate extra income without changing the risk profile of the portfolio.”

Despite the current retail-market issues, Asia is the fastest growing region for Barings’ $9.2 billion multi-asset business as a whole, but it declined to provide a regional AUM figure or net flows for 2015.

Demand for multi-asset exposure has been on the rise in Asia in recent years, with institutions in the region awarding a growing number of mandates. Taiwan’s Bureau of Labor Funds is evaluating bids to run its first multi-asset portfolio, a $1.8 billion mandate to be run by four managers. In addition, Chinese insurers such as China Life have been building allocations in this area, and Thailand’s Government Pension Fund (GPF) issued its first multi-asset mandate in 2014.

Barings has won two multi-asset mandates from Chinese insurers in the past year, but declined to give names. It is also understood to be one of the three managers running multi-asset portfolios for GPF. The fund house declined to comment for reasons of client confidentiality.

Elsewhere, Barings launched a Korea dynamic asset allocation product in December, with two local institutions invested in the strategy initially. It plans to market the strategy to other investors in the country, said Valensise, who did not reveal the product’s AUM.