AsianInvestor’s best alt funds, COO and asset manager
AsianInvestor is pleased to announce the final set of winners for our annual Asset Management awards. For our awards dinner on May 31, we revealed the three funds to win our alternative fund categories in the asset class portion of our awards, as well as announcing the chief operating officer of the year.
Most importantly, we unveiled the winners of the Asia fund house of the year and Asset Manager of the year. Read on to find out the winners for these categories.
BEST ASIA PACIFIC FOCUSED HEDGE FUND
Shanghai Megatrust Investment Management: Yangtze Fund II
With index provider MSCI opening its Emerging Markets index to China’s local A-shares, the country looks set to increasingly take up more of international investors’ attention in the months and years to come. That is likely to be good news for Megatrust Investments, which focuses its hedge funds on profitable investments into the country.
It boasts two particularly strong vehicles, with its Yangtze Fund II being the more impressive performer, by a whisker. Alternatives data provider Preqin notes that the fund was the 10th best-performing Asia-Pacific focused hedge fund over three years, with a 22.47% annualised return, and the third-best over five—offering 28.81%.
This was only marginally better than Megatrust’s Yangtze Fund III, which ranked ninth over three years with a 24.49% return and fourth over five years, offering 28.45%.
The Yangtze Fund II is 10 years old this year, which specialises in investing into A-shares, offering absolute returns with a measure of downside protection. Megatrust says that it offers deep-dive, bottom up research to pick sectors and stocks, before buying and holding companies it thinks will perform well. It has been offering good long-term returns throughout its lifespan, providing a compound average growth rate of 17%.
Portfolio manager Jialin Chen directs the investment strategy; an industry veteran with 23 years, he has long focused on value investing. To complement his expertise, the fund has also invested more into macroeconomic research, as trade and global interest rates become a bigger factor for China’s ongoing performance.
ASIA PACIFIC FOCUSED REAL ESTATE FUND
LaSalle Investment Management: LaSalle Asia Opportunity Fund IV
Property investing has always been a popular retail past time in Asia, but institutional investors have increasingly looked to take advantage too, in their hunt for yields and diversified returns. It makes sense too; generally benign economic conditions for several years have helped property funds to lock in some impressive rates of return.
LaSalle Investment Management’s Asia Opportunity Fund IV has been on such standout. According to Preqin data the $585 million fund has boasted a net internal rate of return of 35.6% from its vintage year in 2013 to September 2017. That placed it third, and the two funds above it were far smaller in size. All-told, it has offered a 38.4% IRR before a performance fee was levied, mostly by investing into Japan and Australia, plus into China and South Korea.
The fund targets an 18% IRR net of fees and expenses, and it takes advantage of LaSalle’s presence in five countries in the region to find real estate to buy into. Mark Gabbay, LaSalle’s Hong Kong-based regional chief executive officer and chief investment officer, and fund manager Marc Monanus over overseen its investing since its launch.
They have focused on property deals that can benefit from leasing and property redevelopment, while looking to quickly make returns by regularly evaluating the price of their investments. Several of the fund’s successes were comprised of investments in Japan that the fund quickly cycled through and sold for a profit. It has sold over 20 properties to date.
The fund ended its investment period in 2016 and its liquidation could conclude by December. Its investors look set to be very pleased with its performance.
ASIA PACIFIC FOCUSED PRIVATE EQUITY FUND
Affinity Equity Partners: Asia Pacific Fund IV
The investors at Affinity Equity Partners have long boasted an understanding of the region, given their former affiliation with UBS, a bank with a strong investment banking presence in Australia and Asia as a whole. They have leveraged this into several successful funds, of which Asia Pacific Fund IV has been a noteworthy inclusion.
Preqin places the fund’s net IRR performance at 30.5% since its vintage year of 2013, making it the second-best performing Asia Pacific-focused equity buyout fund. And with a size of $3.8 billion, it’s no slouch in the size department either. While other funds have performed better, they have not boasted the size and regional span of Affinity’s fund.
In the years since the fund has made a number of profitable investments, including buying a set of universities and colleges in Malaysia from Laureate Education for $180 million late last year. It has been able to benefit from a regional presence in six markets to find interesting investments.
It also bought ticketing and live events group TEG in Australia for A$640 million in 2015, before looking to sell the business last year; it was reportedly close to a sale in April. Meanwhile Affinity and partner SK Planet sold Loen Entertainment in Korea last year to chat app operator Kakao for $1.6 billion, which reportedly earned Affinity more than six times the $238 million it initially invested.
The success of Affinity’s investments, combined with the seemingly inexhaustible appetite of regional pension funds and insurers for alternative assets, helped it to close a fifth Asia Pacific fund in January. With committed assets of $6 billion, it will be interesting to see if it can near the performance of its smaller cousin.
CHIEF OPERATING OFFICER OF THE YEAR
Lilian Tham, COO for Singapore, Asia head of operations and technology, Schroders
Introducing and staying abreast of technology has become an increasing preoccupation of chief operating officers (COOs) at fund managers, as participants in our 2nd COO Forum discussed. In this respect, the impression that Lilian Tham has made among observers in the industry makes sense.
Tham, who has worked at Schroders for over 20 years, was recommended for this awards by several service providers that have worked with her directly. They commended her dedication to upgrading and improve the regional technology capabilities at the UK-based asset manager.
The market experts complimented Tham’s enthusiasm and dedication to modernising Schroders and ensuring it has the robotics tools it needs to compete at a time of mounting interest in cutting edge tech solutions—and the cost-cutting potential that technology can offer.
Tham is a member of Schroders’ global operating committee, which sets its worldwide operating strategy. She has done her part of this in Asia; some of the changes that observers attribute to Tham include Schroders’ increased engagement with robotics programmes to automate many of its processes in the region.
She has helped steer around 40 robotics processes in the firm, which help save staff from laborious and boring tasks. This has saved many man hours and allowed her to shift two of her personnel to other duties. Schroders has been looking to roll these out to its other offices.
Additionally, Tham and her team contributed to Schroders' launch of the beta version of Schroders GO in December. It’s basically an online chatbot that operates via Facebook’s messenger system and lets its clients access market information as well as data on any fund.
In addition, Tham has overseen her fund house’s regional implementation of BlackRock’s Aladdin portfolio risk management platform, to give her company a strong base from which to manage the risks of its funds. It’s helped the fund manager unveil new products too.
BEST ASIA FUND HOUSE
Eastspring Investments
The fact that this marks the third year in four that Eastspring Investments has won this particular award underlines how the fund manager continues to build its capabilities and products for its clients.
Eastspring continues to primarily gain its assets from its parent, the UK-based insurer Prudential. But approximately 33% of its assets under management (AUM) are sourced from third party institutional or retail investors, which aim to take advantage of its funds. All-told, its AUM rose to £139 billion ($186.38 billion) by the end of 2017, 17.8% higher than a year earlier. As part of this Eastspring gained $11 billion of new funds from Asia life insurance and UK life insurers, marking 11 years of positive investor inflows.
The desire of third party investors to give assets to Eastspring makes sense. The fund house had 71% of its funds outperform last year, while 60% have outperformed on a three year basis—a total the fund house wants to raise to at least 66%.
It is building on its Asia presence in 10 markets, teaming with Thai banking group Kasikorn to launch an Asia Fixed Income Fund in Thailand, and partnering with Phillip Sekuritas to distribute mutual funds in Indonesia via its Online Electronic Mart System. It tied up with DBS Indonesia as a mutual fund distributor, taking its total number of distribution partners in the country to eight.
Another big push for Eastspring is China. Early this year the Singapore-based fund house gained an investment management wholly-foreign owned enterprise licence, opening the door for it to offer international funds. And its waiting upon the approval of a private fund management licence, which would allow it to distribute onshore funds to institutional and high net worth investors.
The fund manager has looked to buffer its responsible investing credentials too. After months of work it became a signatory to the United National Principles of Responsible Investing in February.
One topic that has been keeping the fund house busy internally is its adoption of BlackRock’s Aladdin fund risk management system. That promises to help Eastspring better oversee the risks of its various fund portfolios. In addition, it has worked with a custodian to outsource and improve its mid office solutions and performance analytics.
These efforts leave Eastspring to remain a growing regional player in the Asian investment industry, snapping up more third party assets. All of this leaves it well placed to keep growing, as its parent company undergoes its own restructuring to focus more on high-growth markets.
ASSET MANAGER OF THE YEAR
JP Morgan Asset Management
As can be seen from our market categories, one international player continues to boast a strong presence across some of the region’s most sophisticated fund industries.
JP Morgan Asset Management has seen its regional presence grow from strength to strength during 2017. Its regional assets under management (AUM) of $172 billion as of December 31, 2017; 29% higher than the $133.6 billion it had reported a year earlier. Part of this rise was due to its institutional investor AUM, which grew 33% to hit $77 billion at the end of last year, on the back of 61 new mandates. Insurance mandates were particularly strong; JP Morgan AM recorded $6.5 billion growth last year.
The US asset manager has a broad regional presence, with 1,500 employees, a direct market presence in seven markets, and distribution across Southeast Asia. Two markets in which it directly operates—Hong Kong and Singapore—are so impressive that we named JP Morgan AM as a country fund house winner in them on multiple occasions, including this year.
This physical presence has helped JP Morgan AM to offer a broad array of single country funds, in addition to its international product offerings. Many of them perform well; 83% of its mutual fund AUM was in the top two quartiles over a five year period, underlining the general quality of its fund offerings. In addition, 56 of its regional funds enjoy a four or five star rating from Morningstar.
The asset manager has focused on rolling out more multi-asset strategies of late. It’s paid off, with investors allocating $14.65 billion into such funds last year. Another product to gain a lot of support was its China Income Fund; it enjoyed $284 million in inflows last year.
JP Morgan AM focuses on client education, as well as pure investment. It brought together 200 Chinese institutional investors in its China Global Outlook Summit last year, while it does week long Asia Academy and Quantitative Workshops, which bring representatives from institutional investors and help train them in London and New York.
And with environmental, social and governance (ESG) factors gaining more attention in Asia, JP Morgan AM is paying more attention to this space. In 2017 it established a sustainable investment leadership team last year to promote responsible investing themes.
Add into this a strong and growing China presence, in which it aims to keep investing, and it is well placed to benefit from what stands to be hundreds of billions of dollars of inflows into the country over the coming years.
This article has been updated to accurately reflect Lilian Tham's tenure at Schroders, and her team's involvement in the fund house's GO project.