Cathay Securities Investment Trust (Cathay SITE) plans to launch a global high-dividend equity fund this year and will sell its first Ucits Greater China equity fund across Europe and Asia in the coming month or so, as part of a push to expand its actively-managed funds business abroad, according to Andy Chang, Cathay SITE’s president.
In a highly developed and competitive market, Taiwanese fund houses are striving to find their edge against domestic peers and international giants. Many, such as Yuanta Securities Investment Trust Company and Fubon SITC, have opted to conduct passive strategies like exchange-traded funds.
Cathay SITE is interested in this too. But the company’s bigger strategic effort is to develop its overseas active investment fund capabilities through acquisition or joint-venture partnerships.
The global high-dividend fund has a targeted annual return of 6%. It will be designed in cooperation with Conning, the US-based asset management company that Cathay Financial Holdings, the parent of Cathay SITE, bought in 2014. Through Conning, Cathay also bought US collateralised loan obligations (CLO) manager Octagon in 2015. And it is actively seeking out new potential fund house acquisitions.
“Cathay Financial Holdings is very aggressive in expanding its global footprint in asset management,” Chang told AsianInvestor.
The company is eyeing M&A opportunities in Asia and Europe looking for companies that generate good synergy effect with it.
“There are some boutique asset managers in Europe which are facing bottleneck problem in business development, while we have strong sales channels in Asia. Acquisition with these companies can be a win-win result for our both sides,” Chang said.
He declined to speculate on potential targets or asset accumulation levels the parent company could end up targeting, and said overseas AUM levels and new funds would depend upon what offshore companies Cathay Financial Holdings ends up acquiring.
The first product Cathay SITE developed with Conning was the Global Multiple Income Balanced Fund, which launched in 2014 and raised $50 million; its assets under management had grown to NT$8.7 billion ($269 million) as of end March, according to Bloomberg data.
Cathay SITE is also set to bring its first Ucits fund to market before the end of June.
The Greater China equity fund was registered in Luxembourg September last year, under the name of a service provider MDO Management Company, while Cathay SITE is entitled to manage and market the fund, Chang said.
“The Luxembourg [funds] authority has strict regulation protecting investors, so we’ve spent quite some time revising the fund [prospectus, to meet these requirements],” he added. The final version of the prospectus should be completed around the end of May.
The fund will be sold in European countries such as the UK and Switzerland, and also Asian markets including Japan, Singapore, and also Taiwan. It combines a 35% weighting of MSCI China A index, 50% of the MSCI China index and 15% of Taiwan’s Stock Exchange Weighted index to derive its performance benchmark.
Cathay SITE’s confidence in employing Greater China investment strategies stems partly from the joint-venture asset management company it formed with China Development Bank Securities in 2012, called CDBS Cathay Asset Management. The joint-venture house helps Cathay SITE to get direction of China’s monetary and interest rate policies ahead of the market, Chang said.
In the ETF space, Cathay SITE trails many of its Taiwanese fund management peers, but the company is keen to catch up.
It launched its first ETF Cathay FTSE China A50 ETF last year, and its first leveraged/inverse ETFs in March - Cathay FTSE China A50 Daily Leveraged 2X ETF and Cathay FTSE China A50 Daily Inverse ETF.
In addition, Cathay SITE finished fundraising in mid April for an umbrella Japan ETF that tracks Japan’s benchmark Nikkei 225 index, the FTSE Japan Large Cap Super Liquid 2X Daily Leveraged Index and the FTSE Japan Large Cap Super Liquid Daily Short Index Series.
Over the longer term, Cathay SITE plans to launch more ETFs tracking overseas equity markets such as Europe and the US. It is also studying fixed-income and smart-beta ETFs.
“We plan to launch four to six ETFs every year, raising about NT$3 billion ($93 million) in total annually,” Chang told AsianInvestor in follow-up comments. He didn’t offer any more details on the exact type of ETFs Cathay SITE intends to launch.
At the end of February, Cathay SITE had NT$387.73 billion assets under management, including NT$113.17 billion in mutual funds and NT$274.56 billion in discretionary mandates, according to Securities Investment Trust & Consulting Association data.