BoCHK Asset Management, an arm of Bank of China Hong Kong, is keen to create partnerships with financial institutions in the Middle East and Europe to co-operate on developing RMB-focused products.
Au King-lun, chief executive, says he wants to build on recently inked deals with Taiwan’s Fubon Asset Management and German private bank Sal Oppenheim.
BoCHK Asset Management manages CNH (“dim sum”) bonds for Fubon and Asian fixed income for Sal Oppenheim, in return for their exclusive distribution of those products in their respective markets.
“I hope we can extend these relationships to other asset classes,” Au says. This could include Greater China equity, an area where the young fund manager is building a track record.
He says sovereign wealth funds and government-linked pension funds in the Middle East are hungry for RMB exposure, either through Asian bond or CNH mandates. “We want to have more strategic partnerships overseas,” Au says.
The fund house is a newcomer. Bank of China HK has long had a stake in a joint venture with Prudential Asset Management (renamed Eastspring Investments), called BoCI-Prudential.
But that business does not enjoy a strategic relationship with Bank of China at a group level, and the bank wanted an asset management unit to help drive its nascent wealth management platform in Hong Kong.
Au joined the firm as CEO in 2010 from fund-of-hedge-fund shop FRM, and has also run institutional business development at HSBC Global Asset Management.
The fund manager relies heavily on Bank of China for distributing its products. For example, it launched the first private fund for dim-sum bonds in March 2010, which was sold to the bank’s wealthy client segment. “We help the bank implement its private banking operations by providing them with a product line,” Au says.
The fund house is branching out by selling its RMB-investment expertise. In addition to the deals with Sal Oppenheim and Fubon Asset Management (this latter one signed just in November), it has won a mandate from the World Bank for an emerging-market bond fund product; BoCHK-AM’s winning pitch was to tilt the exposure to China-related securities, including issuers in resource-rich countries such as Canada and Australia.
“Our strategy is to be an expert at RMB bonds, and one day in Chinese equities,” Au says, noting the firm has established a Greater China equities team.
Au says the decision to create partnerships with overseas fund managers or distributors was not obvious. As BoCHK-AM was getting started, he was advised by consultants to use the Bank of China brand name to support a line of Ucits funds.
“But we weren’t convinced,” Au says. “Bank of China’s brand is for banking, not for asset management. We had no track record. We’d have to chase distributors, just like everyone else.”
Instead the managers decided to start small and leverage the bank’s infrastructure – it outsources everything to BoC from accounting to economic research – and distribution network.
“I give away exclusivity in return for commitment,” Au says of these partnerships. “The products are co-branded. The partner helps us develop the product and the market. There’s a need out there for investors to diversify out of the traditional currencies, and the RMB is internationalising fast.”