APG Asset Management, one of the biggest European managers of pension assets, has added three investment professionals in Hong Kong and is looking for another as it moves to build up its exposure to Chinese stocks.

The Amsterdam-based firm, which invests €474 billion ($583 billion) for Dutch civil servants' pension fund ABP and other retirement schemes, is also mulling how it will access China's onshore bond market, APG Asia chief executive Wim Hazeleger told AsianInvestor.

Kathy Kejia Xu joined APG from Aberdeen Standard Investments on February 5 in a newly created role. She is a senior portfolio manager for a new high-conviction, ESG-focused China A-share strategy that APG will run in cooperation with Guangzhou-based E Fund. The strategy, which was announced in September, will go live this week, said Hazeleger.

Xu's regulatory licence with Aberdeen Standard ended on January 19 after she had spent a decade there managing Hong Kong and China stocks. The UK firm did not respond to a request for comment.

Kathy Xu

Another China equity portfolio manager is also set to move to APG in April, said Hazeleger, but he declined to name the individual.

In addition, Yang Taeho joined on January 2 as a Korean equity portfolio manager. He had previously been an assistant PM at PineBridge Investments, where his licence ended on November 30. The US firm did not respond to a request for comment. 

Xu and Yang both report to Justin Kim, lead manager of the China and Korea equity portfolios. They are sub-portfolios of APG’s global emerging-market equity allocation, which is overseen by Ajay Cherian out of Hong Kong.

Yang is an addition following an internal reshuffle of responsibilities and coverage, to help manage Korean stocks, which had previously been handled solely by Kim.

CHINA EQUITY APPROACH

APG manages the investments for the China high-conviction strategy, which is a sub-portfolio of the global EM equity fundamental strategies allocation. Meanwhile, E Fund provides investment advice and stock recommendations and handles trading and settlement. The strategy will hold 50 to 60 names for the medium to long term, said Hazeleger.

APG’s QFII quota of $275 million—which was awarded in December and allows the firm to invest directly in A-shares—will be used solely for the high-conviction strategy, said Hazeleger. APG buys A-shares for its other portfolios via the Stock Connect trading link.

“We are building up our China exposure across a number of strategies,” he noted. In addition to the new A-share fund, APG runs a global EM relative-value portfolio benchmarked to MSCI’s EM index and a global EM small- and mid-cap strategy. 

The firm is in the process of recruiting another portfolio manager in Hong Kong for the EM small- and mid-cap strategy, Hazeleger added. 

EYEING CHINA BONDS

When it comes to fixed income, APG runs its Asian exposure out of Amsterdam and has no fixed income staff in Asia yet, noted Hazeleger. But he said the firm would build up its China bond exposure in the coming years as Beijing continues to open up access to that market.

Just as MSCI will partially include A-shares in its benchmarks from June onwards, so the big bond index providers—the likes of Barclays, Citi and JP Morgan—are making similar moves.

“As soon as [Chinese bonds are included in global fixed income indices], we will need to increase our Chinese fixed income exposure,” said Hazeleger. This is likely to mean adding more investment staff, he noted, but APG has not yet decided where they will be based.

The firm is also considering how it will access the Chinese bond market, he added, and is likely to use both Bond Connect—once certain issues are ironed out—and the direct registration scheme for the China interbank bond market.

APG's hiring activity reflects a major trend among both asset owners and asset managers towards building mainland expertise and exposure. Fund houses are busy seeking staff for their onshore wholly foreign-owned entities, and some institutional investors are also hiring. For instance, Canada Pension Plan Investment Board poached Alina Chiew late last year from Goldman Sachs Asset Management, where she was head of China equities.