Barclays Capital's investor-solutions division, which provides mutual funds, listed and OTC structures to retail investors, is keen to launch new index funds in jurisdictions such as Hong Kong and Singapore as soon as securities regulators relax an unofficial freeze on new product launches.
Peter Hu, managing director and head of investor solutions for Asia ex-Japan at BarCap, says regulators in these and other markets have blanket concerns over mis-selling of investment products, in the wake of street protests in September over losses from Lehman Brothers-backed structured notes. The debacle has affected market sentiment across the region regardless of product.
Hu says the firm's business remains in relatively good shape, with "a few billion US dollars" worth of products, listed or over the counter, in Hong Kong and Singapore, as well as white-labelling and other indirect forms of business in other locations such as China, India, Korea and Taiwan.
"We've seen redemptions but we also receive subscriptions because our funds are about providing access to certain asset classes," he says. These include agriculture and commodity funds tracking the Rogers International Commodity Index, for example.
BarCap avoided selling credit-derivative notes, he maintains. The firm began selling index mutual funds in Asia in 2006. These are Ucits-3 compliant products. Private-banking client interest in flow exotic equity-linked products has declined, but Hu says the firm has seen growing interest in rates, commodity and FX-linked ideas.
The Lehman minibond disaster has prompted BarCap to consider manufacturing products that make clear the issuer risk, and provide transparency and liquidity. "Whether it's a fund or a note, any manufacturing must involve these principles," Hu says.
BarCap argues that trying to mitigate investment risk at the manufacturing level is not effective - it's an issue for distributors and end investors. But manufacturers should attempt to clearly delineate issuer and market risk.
"Keeping the issuer risk as the originating bank instead of a special-purpose vehicle is a good start," says Hu.
Hu would not speculate on how regulatory changes being considered around the region may impact the business of making and selling funds and notes to retail investors. "It's hard to say until the changes are made," he says. He acknowledges that the firm's prospects for AUM growth depend on how regulation changes, but for now he hopes authorities will approve the launch of new BarCap index funds within the first quarter.