AsianInvestor’s marquee awards, explained (part 2)
Every year, AsianInvestor’s editorial team conduct an intensive analysis of the region’s leading asset management service providers, fund products and asset managers, to ascertain the top organisations of the previous year.
The winners of these categories combined a mixture of business performance, growth and progress, measured on both quantitative and qualitative criteria.
Below, we reveal the second and final part of our marquee awards and describe why we chose this year’s winners. These cover the top hedge fund manager, best institutional solution/product, the top institutional solutions provider, best Asia-headquartered fund house and the asset manager of the year.
Data on the fund performance of alternative asset managers was provided by Preqin.
BEST HEDGE FUND MANAGER*
Gen2 Partners
Throughout 2019, Gen2 Partners continued to register the sort of performance that its investors have grown to expect.
The company, which runs hedge funds targeted at institutional investors and family offices, saw its total assets under management (AUM) grew from close to $900 million at the beginning of 2019 to about $1.2 billion by the end of the year; growth of around 40%, all-told.
This was spurred in a large part by its extremely strong performance. Gen2’s flagship fund, the KS Asia Absolute Return Fund, boasted over 30% returns as of December 2019, and inception-to-date (ITD) of close to 400%. It stood as the second-best performing medium-sized hedge fund by net returns as of September 2019, according to Preqin.
Its KS Korea Credit Fund was also a notable performer, offering year-to-date returns of over 7% in December and ITD of over 110%. Those sort of return rates no doubt appealed to local insurers and pension funds, which are desperate to ensure better fixed income returns in Korea’s very low rate environment.
The firm’s funds are fully hedged against the US dollar to minimise currency risks; it also utilises options and arbitrage strategies to manage the funds’ risk exposure.
BEST INSTITUTIONAL PRODUCT/STRATEGY
Sony CSL – SDA/Resembler AI solution for Government Pension Investment Fund
Japan’s Government Pension Investment Fund (GPIF) is one of the relatively few asset owners to have delved into the possibilities offered by artificial intelligence in investment decision-making.
Over the past two years, it has employed Sony Computer Science Laboratories (Sony CSL) to come up with AI and deep learning solutions. Its desire to do so makes sense; GPIF has a small investment team, tasked with managing over $1.5 trillion in assets. They have limited resources to do effective due diligence on existing and prospective fund manager partners.
Having automated systems that compare both investment performance and trading behaviour could, therefore, greatly help GPIF’s investment team.
That is what Sony CSL has been doing since 2018. It began with the Style Detector Array (SDA), a deep learning neural network that was built using virtual fund managers. This was used to study what factors most influenced how Japanese equity fund managers invested over time.
Sony CSL followed up last year with a new detection mechanism called Resembler, which uses deeper data analysis to detect trading changes not picked up by the SDA.
The systems help GPIF understand when managers deviate from their investment mandates, which can create otherwise unnoticed risks.
The SDA and Resembler systems are being rolled out at GPIF. They should enable management to measure both existing and aspiring new fund house partners, giving smaller players a chance to impress the world’s largest pension fund.
Other possibilities include GPIF potentially gaining a deeper understanding of market flow data than the asset managers seeking to work with them.
BEST INSTITUTIONAL SOLUTIONS PROVIDER
Amundi Asset Management
For the second year in a row, Amundi has demonstrated its desire to work with Asia’s leading institutional investors.
The fund house’s global AUM rose over 16% over the course of 2019 to hit €1.65 trillion ($1.87 trillion). More than a quarter of the increase could be attributed to organic new inflows from Asian institutional investors, and Amundi’s steady growth in the region means that Asia now accounts for about 20% of its overall AUM.
The fund house enjoyed several key investment mandate wins last year. Most impressive was the fund manager’s ability to gain well over $50 billion inflows of institutional investor funds from an asset owner in India via its local joint-venture.
In addition, it was one of five managers to be awarded a major dynamic emerging markets multi-factor strategy mandate for five years by Taiwan’s Bureau of Labor Funds, and it formed a partnership with Asian Infrastructure Investment Bank to develop a Climate Risk Investment Framework and a $500 million climate bond portfolio.
It also worked with a prominent central bank to help execute and supports its desire to promote environmental, social and governance (ESG) principles across the domestic financial industry. This included training its employees on green bonds and decarbonisation portfolios, supporting its access to international bodies like the Network of Central Banks and Supervisors for Greening the Financial System and advised it on its investment needs across passive ESG, active ESG and climate risk fixed income.
These services particularly speak to the Amundi’s strong ESG advocacy. The fund had about €323 billion in responsible investing strategies at the end of 2019, and has declared it will make its entire fund range to be ESG-compliant by 2021.
BEST ASIA FUND HOUSE*
UOB Asset Management
The regional capabilities of UOB Asset Management continued to impress in 2019, as the Singapore-based fund manager built out across the Southeast Asia region and diversified its AUM away from its home market.
It did so both through organic and inorganic growth. The fund manager’s Singapore AUM grew by 13% while its regional AUM expanded 24% during 2019. Its total AUM stood at S$36 billion ($26 billion) at the end of last year, up from S$30.5 billion a year earlier. Its international asset growth was especially notable in Japan and Taiwan.
In addition, UOB AM made acquisitive forays in two markets. In September 2019, it acquired 75% of Indonesia’s PT PG Asset Management (PGAM) to bolster its access to the fast-growing middle class in the 270 million-strong population.
UOB AM followed this in December 2019 by acquiring a 24.5% stake in Vietnam Fund Management Joint Stock Company, and it plans to raise the stake further upon gaining regulatory approval to make it a subsidiary. Vietnam also boasts a youthful population and the acquisition could enable UOB AM to offer its products to an entirely new audience.
The fund manager was active on the innovation side too, launching 24 new products and services, while continuing to roll out its new digital advisor service, UOBAMInvest, in Malaysia. It also collaborated with Value3 Advisory to create an artificial intelligence (AI)-enabled credit rating, research and reporting service in Southeast Asia, which offers independent ratings for unrated bonds in the region. UOB AM was active on the ESG side too, signing up to the United Nations Principles for Responsible Investment.
ASSET MANAGER OF THE YEAR
JP Morgan Asset Management
The strength of JP Morgan Asset Management’s regional platform is evident not only in the country awards it won (for Singapore and Hong Kong), but its trailblazing path into China.
In August 2019, the asset manager was the first foreign fund house to gain majority control of its local joint venture, China International Fund Management, when it raised its stake from 49% to 51%. It followed this with a full acquisition in April.
While others will follow in JP Morgan AM’s footsteps, it underlines the commitment of the US firm towards China, which is set to be the second-largest asset management market in the world by 2025, according to KPMG.
JP Morgan AM then further bolstered its mainland presence in December 2019 when it signed a strategic partnership to be a preferred product provider to CMB Wealth Management, a subsidiary of China Merchants Bank.
In addition to this, the fund manager gained several more mutual recognition of funds, securing its position as the firm with the most approved northbound funds. All these activities helped ensure it was named the top-performing fund house in China by Z-Ben Advisory in its annual survey in April.
Outside of China, JP Morgan AM’s business continues to thrive. Regional AUM stood at roughly 10% of the $1.9 trillion global AUM at the end of last year, after having expanded by well over 10% during the course of the year. About two-thirds of this rise was down to market gains, while the remainder was due to net asset inflows.
The company could point to strength in its fund performance too. Around 88% of its mutual fund AUM globally outperformed the median of its peers over a 10-year period, while 40 of the 65 funds it offered in Hong Kong last year enjoyed first- or second-quartile performance over three years. It also boasted 28 four- or five-star ratings from Morningstar and a further 19 from Singapore distributed funds – including the Asean Equity Fund, which gained a Gold Morningstar Analyst Rating.
Other testaments to its business strength included a massive rise in asset inflows into its unconstrained fixed income strategy, JP Morgan – Fixed Income, which comprised hundreds of millions of dollars across the region. Another key area of strength was the firm’s Taiwan business, where it stands as one of the largest foreign fund houses and enjoyed AUM growth of over 20% last year.
It has sought to add to market education and engagement as well, launching a new Investment Ideas portal for Hong Kong and Singapore, and conducting its fourth Retirement Industry Conference in Hong Kong in September 2019. All in all, JP Morgan AM enjoyed a year to be remembered.
* Entrants for these categories had to be Asia-Pacific headquartered.