Unlike many of its peers, Aberdeen Asset Management is not trying hard to attract big flows into its $70 billion of Asian equity AUM. It is more focused on increasing the cost efficiency of its current set-up and boosting its fixed income AUM from a relatively lower base.
That said, Hugh Young, Singapore-based head of equities and managing director for Asia, doesn't rule out new equity product launches down the line.
For example, if the firm were to obtain a new qualified foreign institutional investment (QFII) quota, it would consider launching a China fund, but it hasn’t yet applied for one, he says. Other potential products might include a South Korea or Taiwan fund, which the firm doesn't offer at present.
Its existing $200 million QFII quota, which Aberdeen received late last year, has been shared out among the firm's existing funds rather than used for a new product. It is fully invested – around 70% in fixed income and 30% in equities, in line with the original plan.
On the fixed-income side, $50 million of the quota went into a short-duration renminbi bond segregated account for one client, and the rest was spread among its existing funds and mandates.
In terms of equities, the quota has allowed Aberdeen to switch some of its H-share holdings into A-shares, but aside from that it hasn’t been in a rush to buy mainland stocks, says Young. That's because Chinese large-caps tend to be effectively “arms of government policy, and there’s a question of whether our interests will always be aligned with the Chinese government’s”, he explains.
Moreover, a lot of the stocks are new companies, some of which are good and some bad, he adds, and in any case Aberdeen tends to take time building comfort around asset types and get invested. It does own “a handful” of A-shares, such as Baoshan Steel and China Merchants Bank, but far fewer than it does H-shares, although it is gradually building up its exposure.
The China assets are largely run out of Hong Kong, but at some point the team will move to the mainland, most likely Shanghai, says Young, although most of the firm’s Chinese institutional clients are in Beijing.
However, Aberdeen is in no hurry to bring more client flows to its equity funds. About a year ago, the company stopped taking money for new segregated broad-brush Asia mandates.
“We closed them as we’re among the biggest managers in Asia, with some $70 billion in AUM, and in a sense we just want time to digest,” says Young. “We’re happy to take money into open-ended vehicles, but segregated vehicles can have lower fees and can be more complicated, with specific restrictions around certain instruments or tracking error.”
Aberdeen is aiming to avoid ending up with hundreds of accounts all with slightly different requirements, and instead have fewer but larger accounts with lower fees.
However, the firm hasn’t launched a CNH product, says Anthony Michael, Asia-Pacific head of fixed income based in Singapore. “We didn't want to launch a ‘me too’ product at the same time as everyone else,” he says.
Some clients wanted Aberdeen to do so, he adds, but the market is very expensive. Instead the firm decided to launch a broader regional product, giving access to a wider basket of Asian currencies.
“RMB is not the only currency to play. Other Asian countries have allowed more currency appreciation and been more flexible over time,” says Michael, noting that before the recent market turmoil, the Singapore dollar, Taiwan dollar and Indonesian rupiah had all performed strongly.
In addition, the bigger investable universe removes issues such as capacity and provides more diversification, he notes.
Indeed, the short-duration currency product Aberdeen launched in March has raised $550 million globally so far from professional investors such as institutions and private banks. Michael has spoken to investors from as far afield as Germany and Uruguay.