EFG Asset Management, the investment arm of EFG International, is entering the retail market in Hong Kong with the launch of its first series of funds authorised by the local securities regulator. It has previously focused on institutions and high-net-worth individuals.
Moreover, it plans to add investment, research and client-servicing professionals in Hong Kong in response to what it describes as organic growth combined with expansion into the retail arena.
EFG AM is also reviewing how best to enter the onshore mainland market over the long term, with the prospect that China could be added to its existing Asia footprint.
Andrew Lee, EFGAM Hong Kong chief executive officer and also Asia Pacific chief operating officer, told AsianInvestor it chose Hong Kong as its first Asian market for retail distribution due to the market's size and the fact it is a Greater China hub.
The firm will launch four Dublin-domiciled funds authorised by the Securities and Futures Commission (SFC) under the brand New Capital, which is its proprietary Ucits-pooled investment fund platform. The funds are China Equity, US Growth, Asia Pacific Equity Income and Wealthy Nations Bond.
Asked why it was venturing into the retail market now, Lee pointed to the rise of passive funds, saying investors had become unwilling to pay active fees for closet tracker portfolios.
He also believes retail investors will move towards advice-based and portfolio-driven solutions, away from chasing momentum-driven returns. New Capital has marketed itself as a provider of benchmark-agnostic active management that follows a high-conviction model.
Lee said he anticipated challenges in marketing the strategies behind New Capital funds, which target alpha over the long term. He said a lot of effort would be made to work with distributors on pre- and after-sales.
“My view is that the support to distributors will be very important," he noted. "We have to make sure what we are and who we are as a fund house are clearly articulated, and under what circumstances our funds perform well and badly."
On plans to enter the China market via the Hong Kong-China Mutual Recognition Scheme, Lee said this was on its radar but it had not decided how and when it would enter the mainland market.
“Our view is MRF provides abundant business opportunities. It should be looked at as the first step to enter China with a full China roadmap in mind. Don’t isolate MRF,” Lee said.
He said entering China's retail market without an onshore presence was not sustainable; hence, the firm is looking at options including opening a representative office, establishing a wholly foreign-owned enterprise and forming a joint venture. Lee declined to give a timeline for market entry.
EFG AM has 150 employees globally, half of whom are investment professionals. It manages $12 billion in assets globally, although declined to say how big its AUM sourced from Asia was.
In Asia, it has 20 people in Hong Kong and Singapore, half of whom are investment professionals. The firm plans to add headcount in investment and research as well as client servicing as it expands into retail.
EFG AM established its business in Asia in 2011, chiefly covering private clients and institutional investors. It is the investment arm of EFG International and designated investment manager for EFG. New Capital is a brand of EFG AM.