Big in Canada, fund manager goes niche in China

TAL Global Asset Management, a wholly owned unit of Canadian Imperial Bank of Commerce, is looking to expand its Greater China footprint, both by sub-advising pension providers in Hong Kong, as well as considering taking a stake in a mainland Chinese fund management company.

The $41 billion manager is comfortably ensconced in Canada, where parent CIBC ranks as the biggest wealth management provider and the third-largest mutual funds player, and where TAL itself is ranked as Canada's fifth-largest investment management firm. But in global terms, $41 billion is not large, and in Hong Kong, where the firm sources around $600 million of assets from institutions, TAL has had to position itself as a Greater China equities specialist.

It points to, among other things, the stability of its local investment team, led by 16-year TAL veteran Peter Chau, as an advantage. It also markets its tactical asset allocation strategy.

Because it lacks the size and prominence of rivals, TAL does not fare well on investment consultants' buy lists, says Bich Pham, managing director in Hong Kong. "Consultants tend to recommend the same things all the time, and these are usually the big brand names," he says.

TAL therefore relies on direct sales to institutions, and has won over clients such as the provident funds of Hutchison Whampoa, Shui On and the Hospital Authority, the last for tactical asset allocation.

Its next step to grow in Hong Kong is to do more in the Mandatory Provident Fund space, says Pham. The firm already sub-advises Australian insurer MLC, which is an MPF service provider. TAL is looking to launch its own underlying pooled vehicle, in industry parlance called APIFs, which will invest in Greater China equities and will be available to all MPF service providers.

The firm is also providing technical assistance to a Chinese mutual fund company, one of the industry's original 10 houses, with the possibility of taking a stake, either in that company or another. Pham wouldn't name the partner, but says the two firms have worked together on technical cooperation for two years, and that TAL is now assisting the mainland company's bid to win a discretionary mandate from the National Social Security Fund.

(Among the bidders for that mandate are Dacheng Fund Management, Guotai Fund Management and Huaan Fund Management.)

Pham says TAL is not in a rush to seal a JV deal, with its current partner or others. "We want to work with a good-quality, profitable firm. They need us too. We're talking to 10 firms now about requests for JVs or technical agreements. They're looking for partners and want to move fast, do a JV now. But we want to review the market carefully; they're more in a rush than we are. We want to be comfortable with their shareholders as well."

Peter Chau adds the experience so far has been positive, noting how much the firm has learned about the Chinese market by cooperating with a local player. "A technical cooperation relationship lets them see how we do things, and lets us learn about how the market works."