The private banking arm of Credit Suisse is looking to fill gaps in its funds platform and top of the list are suitable funds investing in China’s healthcare sector.
Driving that quest is a growing belief among investors that healthcare providers will likely flourish as a result of policy reforms and structural and demographic changes.
“In the past years we have found increasing interest among clients to invest in the global healthcare sector and the China healthcare sector is one of the product gaps we are looking to fill,” Charis Wong, head of funds and ETFs for Hong Kong at Credit Suisse Private Bank, told AsianInvestor.
She said Credit Suisse received "several client enquiries about China healthcare funds" earlier in the year as Chinese A-shares rallied hard and that, thanks to the market's sharp summer reversal, long term investors now had a better entry point to "participate in this secular growth story."
Unfortunately, she added, the private bank is finding it challenging to find a suitable fund for its clients to invest in.
“We have done due diligence on funds in the market. The China healthcare sector is too niche, so liquidity is a problem. Some funds have $20 million seed money but that’s too small for us,” Wong said.
“That’s why we have been actively looking for new ideas and investment solutions but we can’t find any in the market that are suitable,” she added.
Wong’s team has been actively engaging with fund providers and industry research specialists to identify potential funds in both the onshore and offshore universe.
The few onshore healthcare funds that it has evaluated have a relatively longer track record than their offshore peers; the first offshore one was only launched in April this year. However, these onshore funds had tended to underperform last year, she said, because of their higher exposure to traditional, large medicine companies rather than smaller cap health service providers.
Wong said Credit Suisse aims to take advantage of the newly minted Hong Kong China Mutual Recognition Fund scheme in its search for China healthcare funds though this will take time. The scheme was launched in July this year, allowing for funds in both markets to cross distribute.
“While MRF could open up the sky for the onshore funds market, it could take us some time to beef up research and operational capabilities for this expanded scope," Wong said.
As a result, she said she remained flexible about the possibility of launching a customised offshore fund with a fund provider, were the opportunity ever to arise.
she meant they can launch a new fund together with the fund provider.
Additionally, Credit Suisse is looking to add China money market funds through the MRF scheme.
“I am thinking of cash alternative vehicles, especially in this market environment. The equity market has not been performing. Some clients have redeemed their equity portfolio and put money in cash," Wong said.
“For US dollar cash alternative, we are expecting to identify good alternatives for liquidity management purposes,” she said.
Credit Suisse has the third-largest private bank by assets in the Asia-Pacific region. The group's private banking business in Asia reported total assets under management of Sfr149 billion ($152 billion), up 16% year-on-year as of June 30. Net new assets from Asia Pacific was Sfr11 billion (up 11% over the same period), contributing to 68% of total NNAs generated by wealth management clients worldwide.
Credit Suisse Private Bank also recently added two executives to its Asia fund selection and advisory team.