Hang Seng to shop for alternatives fund additions

Hang Seng Bank is seeking to add an array of new investment funds and enhance its digital platform to improve its fund choice for high net worth clients.

In particular, the bank aims to include alternative tools as part of a broader effort to enhance the investment tools at its disposal, Rosita Lee, head of investment products and advisory business, told AsianInvestor.

“We want to enhance the product suite for high net worth clients, and are looking to add liquid alternatives and direct investment real estate funds,” said Lee.

In addition to alternative funds, Lee says Hang Seng is looking to introduce “simple-to-understand products or reducing the minimum investment requirement. We also want to focus on execution efficiency for investors who want to trade in capital markets,” she said.

Part of this effort involves improving Hang Seng’s customer interaction. Lee noted that the bank is seeking to improve its digital platform “to ensure more timely market and product information is available to our clients,” and it wanted to ensure its clients had the opportunity to buy and sell through the platform in a timely manner.

The efforts will add to a substantial fund offering by Hang Seng Bank, which already distributes about 300 open-end investment funds, covering different regions and asset classes. Its investment management arm manages 39 retail funds, including 15 index or index-related funds and five exchange-traded funds (ETFs).

Fund selecting

To help narrow the array of funds it offers, Lee says the bank focuses initially the fund performance, before considering the philosophy behind the product and the capability of the fund manager to execute the state strategy.

This is a particularly important issue in an area such as global equities, where there is a surfeit of choice. “When it comes to fund managers, sometimes you have teams that manage funds and sometimes you have star managers. A team gives us more reassurance but there are also many good funds with outperforming fund managers,” Lee said.

Part of the job of assessing funds also comes down to a fund’s reliance on individual stars. Lee notes that funds that boast a star who is well encsonced for years would tick her boxes more than one with a good track record, but which had just gained a new manager. Stability is key. That said, “we also regularly review our fund selections on an ongoing basis”.

Hang Seng is also willing to offer feedback to the funds into which it suggests its customers invest, if for example it is a top selling fund but seems to be underperforming its market peers.

“In general, fund houses respond to queries quickly; it’s in their interest after all,” said Lee, reasoning that this proactive approach makes sense. “If we can’t provide up-to-date information to our clients, our clients might change their minds about the fund and shift to another one.”

In the case of passive fund selection, Lee says the main criteria are assessing how closely the funds track their benchmarks (tracking error) and the expense ratio.

“When investing in a passive fund, investors want returns that are similar to the benchmark. There are several passive funds available, so if one fund doesn’t do the job, it’s easy to shift to another,” she told AsianInvestor.

For part one of this two-part interview with Rosita Lee, please click here.

This story has been updated to make clear that Hang Seng Bank is seeking to add alternative funds.