Beijing-based China Asset Management has begun a strategic relationship with Boston’s PanAgora Asset Management to develop multi-asset risk-parity products, with a view to potentially expanding into other strategies.
China AM held the launch event yesterday in Beijing, which was attended by at least 300 firms, including institutional investors and distributors, said Jesse Huang, director of strategic relations at PanAgora. These included insurance firms and banks, with an eye on investing in or distributing the funds, he noted.
“We hope to grow the products into a series of offerings in China, to be offered both to institutions and potentially also as mutual funds through retail channels,” Huang told AsianInvestor.
The move represents another way for foreign fund houses to tap mainland clients other than using the mutual recognition of funds scheme or establishing a local presence such as a wholly foreign-owned entity.
China AM, one of the biggest mainland fund houses, will manage the strategies, with PanAgora providing research support. The products will invest in Chinese assets and be sold to mainland clients.
While traditional asset allocation focuses on the allocation of capital, which results in a portfolio’s risk being concentrated in risky assets, risk parity focuses on the allocation of risk. They are designed to create more stable returns than traditional allocation strategies, and are seen as particularly appealing in uncertain and volatile markets such as the current environment.
China AM spoke to various providers of risk-parity strategies before deciding to go with PanAgora, said Huang. The US firm runs some $7 billion in risk-parity products, out of its total AUM of around $40 billion. Leading research for the strategy is Edward Qian, chief investment officer and head of research for PanAgora’s 14-strong multi-asset team.
China AM, which had $148 billion under management as of end-December, also plans to develop other strategies in the near future.
The two fund firms started discussions about a year ago and realised they had a mutual interest in terms of their views on product development, said Huang. They were introduced by Canada’s Power Financial Corporation, which is a majority owner of PanAgora and holds a minority stake in China AM.
PanAgora does not have anyone on the ground in China, and Huang said he could not discuss whether it had plans to locate staff locally.
Elsewhere in Asia, it has a long-standing partnership with Tokyo-based Nissay Asset Management and with Australia’s Pengana Capital, the latter being set up just last August. The Japan relationship covers a broad range of products, while the Australian tie-up is focused on absolute-return strategies.
PanAgora already has institutional clients in China, as well as in Australia, Japan and other markets in the region, but no retail distribution as yet.