As the fastest-growing asset manager in Asia Pacific in the year to end-September, Fortune SG saw its AUM leap fourfold to $41.8 billion from $10.3 billion, largely due to institutional flows into a single money-market fund.
In order to tap its newly expanded client base, the firm intends to launch a range of equity and commodity exchange-traded funds and bond funds in 2016.
The firm’s Xianjin Tianyi MMF jumped 13-fold from Rmb15.6 billion ($2.4 billion) to Rmb217 billion year-on-year to end-September, with most of the flows coming during China’s stock rout in the third quarter.
Moreover, by end-September some 90% of the MMF’s assets were institutional, up from 50% a year earlier, said Alexandre Werno, Fortune SG’s executive vice general manager. As a result, the institutional proportion of the company’s total AUM nearly doubled to 74% at end-2015 from 38% year on year.
This growth catapulted Fortune SG to 56th in AsianInvestor’s list* of the top 100 firms by Asia-Pacific-sourced assets, whereas it wasn’t big enough to make the list at all the year before.
What's the secret of the MMF’s success? “One reason is that during the stock market correction, many investors considered it a very liquid investment tool,” said Werno. In addition, it’s convenient for investors to switch from equities into the fund because it is an exchange-traded product, he noted.
Werno conceded the Shanghai-listed fund would shrink this year from its 2015 peak, but said the decrease was “quite normal because it’s an MMF and needs to provide liquidity to investors”. Fortune SG, a joint venture between French bank Societe Generale and China's Baosteel, expects the fund’s assets to range between Rmb130 billion and Rmb200 billion in 2016.
Werno argued that the firm’s newly expanded institutional client base would create opportunities beyond MMFs for products such as exchange-traded funds and bond funds.
Fortune SG is planning its series of funds in 2016 with a view to attracting institutional money and compensating for the fall in MMF assets.
In the near term, the firm will launch a QDII fund tracking the S&P 500 Discretionary Consumer Index at end-February and a closed-end one-year bond fund around March.
Moreover, in December Fortune SG submitted an application to list a copper futures ETF to track the metal’s price in China, and will consider launching other commodity ETFs. Werno expects commodity prices to rebound, arguing that investors should therefore get some exposure at current levels.
During the September-to-September period, Fortune SG didn’t launch any bond or money-market funds, but launched 11 new equity-related funds, raising Rmb26 billion in total. Of these, four were pure domestic equity funds, six were hybrid funds with a higher concentration on equities and one was a QDII fund.
*The list will appear in the upcoming (March) issue of AsianInvestor magazine.