Franklin Templeton eyes liquid alts expansion

The asset manager is set to launch a liquid fund-of-hedge-fund product in Korea. Sources say Singapore is next, with Hong Kong and Taiwan also on the list of target markets.
Franklin Templeton eyes liquid alts expansion

US fund house Franklin Templeton is about to launch a feeder structure for the institutional share class of a fund-of-hedge-funds (FoHF) product in Korea, continuing its regional push into liquid alternatives.

It’s understood that the same share class for the Franklin K2 Alternative Strategies fund is currently being approved in Singapore, but has not been given the green light in Hong Kong and Taiwan.

Franklin Templeton declined to confirm this or comment on when it expected to receive approval in the markets in question.

The asset manager is hoping to tap demand for FoHFs from smaller institutions, many of whom have yet to allocate to hedge funds, at least partly because larger clients are more inclined to go direct now.

The institutional share class is subject to fewer constraints than the Ucits version made available late last year on wealth management platforms in Hong Kong and Singapore. For example, the new share class is not constrained by short-selling restrictions. 

The move towards developing a liquid institutional share class was spurred by many institutional investors’ aversion to hedge fund lock-ups, said Steven Moeller, Asia head of multi-asset solutions at Franklin Templeton. Another issue is that some investors – such as insurers – are subject to higher capital charges when they allocate to less liquid assets.

Big institutions are more inclined to invest directly in hedge funds now than allocate to FoHFs, added Moeller. Hence managers have moved to adapt their offering for smaller institutions, which have yet to build the expertise to allocate directly, he noted. This includes adapting to needs related to client relationships – such as local-language staff – and greater liquidity.

And Korea is seeing a particularly strong move among smaller institutions into hedge funds compared to elsewhere in Asia, said Moeller.

Moreover, the country's domestic hedge fund industry has developed rapidly in recent years, after the local regulator made moves to relax certain barriers to entry.

Since he relocated to take up his current role in Asia last June, Moeller’s time has been split between developing multi-asset solutions and liquid alternatives businesses for both institutional and retail clients in Korea.

Meanwhile, liquid alternatives has been a greater focus for him in Hong Kong and Singapore, and multi-asset solutions in Taiwan.

Moeller’s unit customises investment solutions for clients – combining hedge funds, alternative beta, index and mutual funds – and incorporates FoHF manager K2 Advisors, of which Franklin Templeton acquired a controlling stake in 2012.

The multi-asset solutions team now has 82 investment professionals globally, up 10-15% over the past 12 months, said Moeller.

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