Barings expects emerging-market AUM to grow

Baring Asset ManagementÆs planned expansion in Hong Kong highlights the importance of China to the firm, says Marino Valensise, global chief investment officer.

Baring Asset Management expects the proportion of its assets managed in Asia -- which already accounts for one-fifth of its $47 billion in assets under management -- to rise, and plans to add staff in Hong Kong in the coming year or so.

One reason for this is that emerging markets are core to the London-based firm's investment strategy, said global chief investment officer Marino Valensise on a trip to Hong Kong in December.

The AUM figure alone doesn't tell the whole story, he adds. "The fact we have $10 billion under management in Asia doesn't mean we make the same proportion in terms of revenues," says Valensise. "For example, you charge more for managing emerging-market equities than UK equities."

He notes that assets managed in Asia, Eastern Europe and other emerging markets account for more than 50% of the firm's global revenues.

And expansion is on the cards. Barings has 14 Asia-based investment professionals, including research staff and fund managers, all in Hong Kong. The office will see a rise in headcount in the next 12-18 months, says Valensise, because it is key to the firm's business and will drive its growth in the next couple of years.

"We have a few searches out there and are looking to strengthen the team," he adds, but other office openings are unlikely, at least in the foreseeable future.

It comes as little surprise that Barings needs to hire. Elvin Yu, formerly the firm's head of institutional business for Asia ex-Japan, moved to RCM in August and has not yet been replaced. And in late 2008, Barings unwound its alternatives portfolio and disbanded its institutional sales team in the region, with chief executive Gerry Ng taking up the responsibilities himself.

Still, the asset manager appears to be making progress in the region. In China, it received qualified foreign institutional investor status in September and is awaiting its quota of A-shares, along with a number of other firms, such as BNY Mellon. "We will be working on that specifically for next few months, and would expect to receive it sometime in the next six months," says Valensise.

He suggests the signs are good for Barings. The firm's Hong Kong and China fund is the largest retail equity fund in the Hong Kong/China market, with $5 billion in AUM. It also has a track record of more than 25 years, he adds, longer than any asset manager based outside Hong Kong. The firm also has another China fund that is available to Hong Kong investors, the $84 million China Select Fund, launched in early 2008.

Emerging markets have long been central to Barings' strategy, says Valensise. "Our business plan is mainly based on one concept: we want to invest client money in investment opportunities where GDP per capita is rising," he says. "And that's the case in emerging markets such as those in Asia."

In turn, the firm wants to distribute its investment services in markets where GDP per capita is rising, since they are where people are becoming richer, have more to save and therefore will buy more investment products, he says. In addition, pension funds are being set up in many emerging countries that don't currently have retirement schemes or systems, adds Valensise, which is also driving investment trends.

"So our strategy is driven on both sides by emerging markets," he says. "We get most -- and by that I mean significantly more than 51% -- of our revenues and profits globally from emerging markets."

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