Temasek subsidiary Fullerton Fund Management moved yesterday to close its global bond fund managed out of Asia, AsianInvestor can confirm. Investors in the fund will be redeemed.
The strategy had amassed just S$15.5 million ($12.3 million) as at the end of April this year, having been incepted in November 2009. Its withdrawal appears to reinforce how hard it can be for houses (particularly Asian) to manage global funds out of this time zone.
“Arguably you can manage global bonds successfully from anywhere,” noted a senior industry source. “The trouble is in attracting funds if you are an Asia-based fund manager,” he added.
Sources tell AsianInvestor that the optimal minimum AUM for running a global strategy out of Asia is $25 million.
“It would be very difficult to run a diversified portfolio at that level of assets against the Barclays Global Aggregate,” noted one fund manager based in Asia.
He added that managing global portfolios out of Asia equates to long working hours, given that trading and execution needs to be carried out overnight Asia time, so having staff based on the ground in Europe and/or the US becomes key.
Institutional investors in Asia typically look to the big global firms for such strategies, with established track records of managing global funds out of one of the global financial hubs.
However, in a statement sent to AsianInvestor after we went to press, Trevor Chudleigh, head of business development for Fullerton Fund Management, said: "Fullerton is an Asia and global emerging markets investment specialist. We took the decision to close the global bond fund because it was not seen as consistent with our strategic focus as an Asia and GEMs specialist, and not because of any difficulty in managing a global bond fund out of Asia.
"We feel it is important to offer investors a set of core investment strategies that stand the test of time and that are consistent with our strategic positioning."
What would have additionally challenged Fullerton in its management of a global bond fund is that the likes of Singapore’s GIC tend to manage global strategies in-house, rather than outsource to a third-party manager. Fullerton’s parent Temasek, meanwhile, is more focused on private equity and direct investment, the fund management source added.
“Typically institutional clients would have a hard time making a leap to believe an Asian-oriented manager would have an advantage in managing global securities,” said another senior fund management source. “Global fixed income is one of the most competitive spaces in our industry. If you are out there trying to raise assets, you are competing against the big global firms.”
A spokeswoman for Fullerton Fund Management told AsianInvestor: “The fund will be terminated on Tuesday [June 3] and it will no longer be open to investors. Existing investors will be redeemed.”
Asked why the fund was being shut down, she replied: “It can be seen from recent reports that the fund has done well, and it’s natural for asset managers to review and revise their portfolio from time to time.”
Certainly performance was not an issue. In US dollar terms the fund delivered an annualised return of 7.54% over the past four years, against 3.86% for the benchmark Barclays Global Aggregate Index. Moreover, its risk-adjusted performance has been excellent, with excess return of 3.68%, information ratio of 0.53 and tracking error of 5.15.
The fund has been managed for the past four years by Fullerton Fund Management’s head of fixed income, Patrick Yeo.
The global bond fund was composed primarily of investment grade debt, including government bonds, asset-backed securities and Asian corporate bonds. The balance of the portfolio of up to 5% could be invested in other authorised investments. It could also invest in futures and derivatives for hedging and efficient management.
Overall it held 8.7% in securities rated AAA, 18.1% in AA and 16.5% in A. Its lowest holdings were BBB (11%), while it held 45.7% in cash.
As of this January its chief market exposures were Germany (9.3%), the US (9.1%), Hong Kong (7.1%), Korea 4.6% and the UAE (4.1%). Canada, France and Israel were all at 3.9%.
By currency it was predominantly US dollar (26.1%), Singapore dollar (23.3%), euro (23.1%) and yen (14.7%).
Fullerton’s global bond fund was a legacy offering. Headquartered in Singapore, the fund house focuses on Asian-oriented equities, fixed income and alternatives.
This March AsianInvestor reported that Fullerton was in expansion mode, opening a new branch in Tokyo, setting up an office in London and adding staff to develop new investment strategies.
This May it was granted renminbi-qualified foreign institutional investor status by the China Securities Regulatory Commission. It had been awarded qualified foreign institutional investor status in May 2012.
Prior to its incorporation as an independent asset manager in December 2003, Fullerton operated as the in-house fund management and treasury department of Temasek Holdings, the state investment company with a S$215 billion portfolio.
With more than 20 years of experience in managing Asian and global mandates, Fullerton managed around S$12 billion in assets as at September 30 last year.