French fund house BNP Paribas Investment Partners is adding two multi-asset income funds to its line-up in Asia amid expectations of continued investor demand to counter market volatility.
The firm told AsianInvestor it would make its global multi-asset Luxembourg Sicav available for the first time to Asian institutional and private clients in the next few weeks. The BNP Paribas LI Multi Asset Income Fund targets a 4% annual income.
Moreover, it is preparing to launch a new emerging market multi-asset fund globally next year, with distribution to include Asia. This will invest across asset classes in Asia, Latin America, Africa and Eastern Europe.
The two funds are being rolled out in this region after BNPP IP’s first multi-asset product in Asia – the BNP Paribas A Fund European Multi-Asset Income – has seen healthy flows since launch a year ago. It currently has $650 million in AUM.
On the back of these plans, BNPP IP will be expanding its distribution sales team in Asia with the addition of two sales executives, one each in Hong Kong and Singapore.
Tino Moorrees, BNPP IP’s Hong Kong chief executive and Asia head of distribution, forecast that interest in multi-asset products would remain strong given the benefits of diversification in a volatile environment.
“Multi-asset managers have the ability to take the broad view and to look across asset classes to take advantage of pricing inefficiencies, or to simply lower market risk in a highly volatile environment by reducing their higher-beta investments,” he said.
“For example, whilst we favoured a long equity/long risk position, we recently took some risk off of our portfolios as we believe that the market is getting increasingly nervous around data from the US and China and around the Greek situation.”
Moorrees noted that while its European multi-asset fund had attracted interest in Singapore and Hong Kong, flows were less forthcoming from Korea and Japan.
He suggested Malaysia and Thailand had shown greater affinity for multi-asset, and as such the firm could look to distribute the fund there via a feeder-fund structure.
This would require a local distribution partner as BNPP IP doesn’t have a local operation in Thailand, and its office in Malaysia is focused on institutional clients.
While the core markets for multi-asset are Hong Kong and Singapore, Ng Sze Yoon, Asia research director at Cerulli Associates, pointed to Taiwan and Korea as slowly warming to the concept, even if appetite was not yet as strong.
“Income is a strong theme and multi-asset funds that can provide regular distribution from diversified sources are favoured by investors,” she said.
She noted that for the first quarter of 2015, net inflows from Asian investors into multi-asset funds stood at $29 billion. Of this, a dominant $20 billion came from Chinese investors.
However, these figures present a distorted picture. From August last year, the China Securities Regulatory Commission revised its definition of what constituted an equity fund. Now it must have at least 80% allocation to equity, from 60% previously.
As a result 344 equity funds have since switched category to multi-asset where allocation is more flexible, according to Galaxy Securities Fund Research Centre.
“Of course, the recent crash in Chinese stock market will mitigate some of these flows,” Ng observed.