Pictet AM targets WFOE, multi-asset buildout

Pictet Asset Management is moving to expand its China and Hong Kong capabilities on several fronts.

The Swiss firm has applied to register its first unit trust in Hong Kong with a view to launching a multi-asset income product and is set to hire a multi-asset investment specialist in the city. It also plans to set up a wholly foreign-owned enterprise (WFOE) in China with business development and investment research capabilities.

The unit trust will be a first step towards participation in the Hong Kong-China mutual recognition of funds (MRF) scheme. The firm hopes to receive approval before the summer, after which it plans to launch a multi-asset income fund.

The decision to apply for a Hong Kong-registered investment vehicle is not exclusively focused on the MRF scheme, but with a view to further developing other business in the city, said Amy Cho, Asia head of Pictet AM.

A Hong Kong unit trust provides the flexibility to launch products suitable for local investors, she told AsianInvestor. “A Hong Kong fund umbrella, for instance, allows us to launch products such as in CNH [offshore renminbi] share class.”

Under the MRF eligibility rules, Hong Kong-domiciled funds must have at least one year’s track record and be managed in the city.

Pictet AM, with Sfr155 billion ($151 billion) under management, has multi-asset teams in London, Italy and Japan, hence the need to hire a multi-asset senior portfolio manager in Hong Kong. This will add to its 12 investment professionals in Hong Kong covering Greater China equites and Chinese bonds. 

The multi-asset space is becoming increasingly crowded in Asia, with the likes of Fullerton Fund Management and Standard Life Investments among those recently moving to increase their focus. 

Given the eligibility rules, Pictet will not be participating in MRF for a year or two, but Cho said she was not concerned about being late to the game. “China is just opening up. It is important that we have the right infrastructure in place for longer-term distribution in mainland China,” she noted.

It also needs to find suitable master agents for its MRF business, said Cho, and she did not rule out distribution via online platforms, both in China and elsewhere in Asia.

However, as assets under management grow in China, the need for a local presence is becoming a necessity, she noted.

Cho said Pictet AM might establish a WFOE in China in the next two to five years, but that there was no definite timeline. Foreign asset managers to have made such a move include Aberdeen, Fidelity, Schroders and UBS Asset Management.

Setting up a joint venture had not been a consideration, given Pictet’s partnership structure. “We are keen to grow organically,” Cho said. 

Pictet is considering the options available for establishing a mainland presence and whether to put it in Shanghai (to employ the qualified domestic limited partnership (QDLP) scheme) or in Shenzhen (for the qualified domestic investment enterprise (QDIE) programme).

Cho said Pictet’s entry strategy for China – and other Asian markets – strategy would be similar to that for Taiwan, where it entered the retail market through a master agent. After gathering institutional and retail assets, it moved to build up its local service offering by setting up a securities investment trust enterprise in early 2012.

Pictet already has access to mainland assets via its QFII and RQFII licences; it holds $108 million and Rmb1 billion ($154 million) quota for the latter two schemes, respectively. It was granted a QDII licence in 2007 and since then Citibank has been its sole distributor. 

However, other asset managers, including US-based AllianceBernstein and Singapore's Fullerton, admit that QFII and RQFII quotas have become less important in light of developments such as the Shanghai-Hong Kong Stock Connect and the further opening of China's interbank bond market.

In fact, AllianceBernstein plans to voluntarily return its RQFII quota, in a clear indication of the scheme's growing obsolescence, while Fullerton's CEO and CIO, Manraj Sekhon, has called for more clarity in this area.

Cho declined to comment on Pictet AM's plans for its own quotas.