Sweden's East Capital, an emerging markets-focused fund house, has reduced its Asia headcount and handed back most of its Hong Kong licences in the face of the uncertain global economic outlook amid the Covid-19 outbreak.
“We have decided to consolidate some parts of our business globally, and this means that we are handing back our licences to the SFC [Hong Kong’s Securities and Futures Commission],” said Karine Hirn, Hong Kong-based co-founder, partner and chief sustainability officer at East Capital.
“But we remain committed to global emerging markets and to Asia,” she told AsianInvestor by email, adding that the firm would retain a research function in Hong Kong.
Hirn said that she too would remain there, supporting the portfolio management operation in Europe. She is now the only licence holder left in the office.
SFC licences ceased on April 30 for the following members of staff: Asia head François Perrin, China portfolio manager Dmitriy Vlasov, assistant portfolio advisers Felicia Hong and Sumeet Bhalla, and Michael Hanson-Lawson, who sources say had been working as an adviser to the firm.
Hirn declined to comment on who had left and who would remain alongside her in the Hong Kong office.
AsianInvestor understands that two members of the office's seven staff are working their redundancy notices.
A spokesman for East Capital acknowledged that "the reorganisation will involve changes" but declined to comment on how these changes would affect staff numbers, nor to confirm how many of its Hong Kong team were working their notice periods.
Meanwhile, East Capital’s clients in Asia are institutional and should experience little change in coverage because it has been handled from other locations for a couple of years, said Hirn. Dubai-based Marcus Alstrom will continue to oversee sales for the Middle East and Asia, she added.
Similarly, the portfolio management function will continue to be run out of Europe, she said.
Hirn declined to say whether there would be layoffs in any of East Capital's other locations. It also has offices in Dubai, Tallinn (in Estonia), Luxembourg, Moscow and Oslo, in addition to its Stockholm headquarters.
The €3.8 billion ($4.2 billion) fund house had set up the office in 2006 and added a Shanghai presence in 2010, before closing the latter branch in 2013 and consolidating its Asia headcount in Hong Kong.
EMERGING MARKET WOES
“After 22 years in the business of investments in emerging and frontier markets, we have learned to be resilient,” said Hirn, “and I am convinced that every challenging time forces us to think smarter, and we come out stronger and fitter.”
Emerging market investors certainly face a difficult period as coronavirus lockdowns gradually ease around the world but global recession looms. Asia is, however, emerging more quickly from the crisis than other regions.
The first quarter of 2020 saw the largest ever quarterly outflow of foreign capital from emerging market investment portfolios (across debt and equity) – $62 billion – said the Washington, DC-based Institute of International Finance early last month.
And there may well be more such redemptions this year, the institute added, on the back of the fallout from Covid-19. That said, most of the withdrawals have been from emerging markets other than China, it noted.
East Capital is not the only asset manager to have seen departures in Asia amid the turmoil in recent months. BrightSphere Investment Group said this week that it had closed its Hong Kong umbrella sales office following a change in strategy, while Matthews Asia's regional chief Lindsay Wright left the firm in March.
This story has been updated to indicate that most of the Hong Kong headcount are still currently working for the firm but that two individuals are understood to be working their notice periods.