European firms mull Asia credit strategies
Two European fund management firms are understood to be at different stages of potentially launching Asian credit funds as dedicated Asian strategies.
London-based Ashmore and Paris-headquartered BNP Paribas Investment Partners are both exploring possibilities in this area, on the understanding the environment is ripe for allocation to EM and Asian debt.
Ashmore is an EM-focused house running over $65 billion in AUM globally. Of this about 20% is sourced from the Americas (majority North America), 30-35% from the UK and Europe and the rest from the Middle East and Asia.
Late last year the firm hired Kon Chee-Keat from Lion Global Investors as its head of Asian credit, as reported. He was understood to be its first Asia-based PM with regional responsibility for public markets in a move that pointed to its expansion ambitions.
Sources say Ashmore is potentially looking to launch an Asian credit strategy in the third or fourth quarter this year in mutual fund form via its offshore range in Luxembourg. It is expected to focus on Asian corporate bonds and provide a mix of local currency, investment grade and high yield.
Speaking more broadly during a chat with AsianInvestor in London, Christoph Hofmann, global head of distribution at Ashmore, said: “When you have an asset class such as emerging markets, which is increasingly well understood, you will have appetite and demand for more specialised products.”
At the same time, BNPP Investment Partners is also potentially looking to launch an Asian corporate debt product. Mark te Riele, deputy Asia-Pacific CEO, recently observed: “The asset class is developing rapidly, with China opening up and more corporate bond issuance in Asia.
“We feel that will very soon be an asset class on a par with European and US fixed income. More and more [Asian fixed income] is being acknowledged by US and European investors, who are moving their safe-haven assets from European sovereign bonds to Asian sovereigns.”
However, as a note of caution, Aberdeen Asset Management shuttered an Asian credit fund last December that had been run by its former head of Asia credit, Scott Bennett.
Anthony Michael, Aberdeen's Asia-Pacific head of fixed income, says the firm has been focusing on its Asian local currency short duration bond fund over the past 18 months. "We are hoping to launch an Asian credit fund to a broader global client base next year," he confirms.
Corporate governance is often cited by investors as a reason for caution when it comes to emerging markets and Asia, although Hofmann argues the only difference between emerging markets and developed markets on that front is that in EM the risk is priced in.
But he concedes that the majority of fund flows have been into broader products than Asian debt: “That is where we see the bulk of the assets going.”
Ashmore has 89 fund managers globally, with 11 offices in 11 countries. Of its $65 billion, Hofmann estimates about half is managed on a funds basis and half in segregated mandates.
About 90% of its client base is institutional and 10% is retail via intermediaries. Breaking the institutional segment down, Hofmann says 40% are government institutions, 30% public and private pension funds, and the rest foundations, endowments, banks and insurers.
“In general a fund is a better vehicle because it is a bigger pool of assets and gives you more diversification,” he notes. “We have some very large institutional clients in mutual funds.”
Earlier this year Ashmore received an AsianInvestor award in the emerging markets fixed income category for its Emerging Markets External Debt (Sovereign) Composite fund in the magazine’s annual investment performance awards.