Something to brag about The Hong Kong Investment Funds Association asked me to give a talk to the membership in December, which was very nice of them. I ran the audience through a montage of AsianInvestor research – trends about industry size, who’s gathering the most assets, that sort of thing. It’s always a pleasure to spread the word about the work we do, but during the Q&A I was asked a reasonable question and flubbed the answer. I had expressed some cynicism about the success of ‘investor education’ campaigns over the past 20 years, and noted that mutual funds remain a plaything rather than accepted as a serious vehicle for long-term savings. The question, quite sensibly, was what I suggested the industry should do about it, but I replied in gibberish. This is too bad, because we in Hong Kong are about to get a new opportunity to give funds a new image. And that has to do with its Mandatory Provident Fund scheme (see feature, page 38). The political class here refuses to take responsibility for retirement-related issues. All of Hong Kong’s biggest challenges relate to how it will deal with the ageing of its people, including housing, healthcare, immigration, infrastructure and investments. Yet the underwhelming candidates for Hong Kong’s sham election of its next chief executive won’t discuss it. There are no political favours won in addressing the headaches around demographics, as was demonstrated by the government’s failed attempt last year to inject money into MPF accounts. MPF has developed a reputation for lining the pockets of a financial elite while delivering expensive, shoddy products to a captive investor base. Whether or not this is the reality, no one in government, including MPF’s regulator, has seen fit to defend the regime or make a public case for important reforms, such as raising contribution levels or staggering benefit payments. This is regrettable, considering that no MPF funds have gone missing. Unlike structured products such as the notorious Minibonds, MPF investments are safeguarded, and investors have full transparency regarding their accounts. What about the system’s high fees? Tackling this has been a big priority for the regulator, and is one of the driving forces behind the introduction of (limited) employee choice of provider, expected this year. Yes, MPF fees are high and should be encouraged to fall, but this is not as big a problem as people make out. In fact, compared to what’s available in the cash market, those fees start to look reasonable. My wife and I, affluent but not rich, recently opened an account at one of the big-three bank distributors in town. We hoped to find a service that encouraged sustained, long-term investments based around dollar-cost averaging. No such luck: our bank was going to charge us 4% per month if we wanted to set up a regular investment plan into one or more mutual funds. These so-called wealth managers are no such thing. They are brokers pretending to be consumer bankers. In contrast, the steady drip-feed of my money into one of the better-performing funds in MPF will surely beat whatever I give those pirates at the bank, net of fees, unless my market-timing acumen turns out to be George Soros-like. The best way to reduce MPF fees is not through half-baked choice arrangements, but via scale. Changing contribution levels should be a more urgent priority for policymakers. And the industry can do its bit to increase volumes: by making MPF more popular. The MPF name is tarnished, but the underlying system is robust and safe. It is screaming for a rebrand. Limited choice is nearly upon us as we begin the Year of the Dragon; now is the time for the industry to take a bit of pride in something that actually works. Jame DiBiasio Editor REGULARS Contents 4 Up front Banks slash equities staff; MUFJ and AMP tie-up; Axa closes ipac unit; Who succeeds Scott Kalb at KIC? 10 Up front: on the move Julius Baer poaches Sarasin team, and more 12 Operations manager Rob Scott, Deutsche Asset Management 13 Regulatory roundup China private equity regulations, and more 14 Fund flows The extent of the damage to Asia equity mutual funds 16 Q&A Kelvin Blacklock, Prudential Corporation Asia FEATURES 18 New hope for India’s funds industry Longer-term equity products, a more pragmatic regulator and more foreign players boost mutual funds 22 Digesting mooncakes With RQFII, Chinese asset managers start the year on a busy note, but consumers will struggle to figure out one product from another 24 Full internationalization of the RMB gets closer News from AsianInvestor’s conference on the renminbi 32 It’s still about ‘emerging’ markets Dividends, debt and defaults are the things to watch out for in equity and fixed income 35 New offerings in Thailand’s funds business The growing diversity of products in Thailand’s funds industry is creating openings for niche providers 36 Malaysia’s funds industry expands Malaysia’s retail market is starting to benefit from a growing cross-border product set 38 Silence before the silver tsunami Hong Kong’s next chief executive must break the silence around retirement issues and advance reform of the Mandatory Provident Fund system 42 Malaysia erects a new pensions pillar The government finally formalises rules for a new private retirement scheme, but questions abound 44 Looking to Asia and the world Investors gathered in Kuala Lumpur at AsianInvestor’s Southeast Asia investment summit to discuss portfolio opportunities in 2012 ALTERNATIVE INVESTOR 48 Not entirely doom and gloom Asian hedge funds had a tough 2011, but prime brokers see increasing investor activity into the sector, suggesting 2012 should be a better year 50 Where the action will be Hedge-fund managers describes the macro concerns and potential opportunities in Asian markets this year 52 Alternative Q&A Nobuyuki Idei, Quantum Leaps 82 Alternative roundup Hedge fund closures; Japanese love hotels; Huttenlocher’s Myriad launches ROUNdTAbLE 26 What’s ahead for emerging markets Senior asset management execs discuss how to grow business in a ‘risk-off’ environment
AsianInvestor is a monthly magazine dedicated to the asset-management industry in Asia Pacific, from Tokyo to Dubai. The people who read us, and the industries we write about, include:
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