Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
Fidelity Investments is offering its Emerging Europe, Middle East and Africa (Emea) Fund this month, with the biggest exposures to Russia and South Africa. The selling point: mineral- and resource-rich countries exporting into the economic growth stories of China and India that are not part of Asian investorsÆ exposures.
Schroder Investment Management is now marketing its Schroders Middle East Fund to Hong Kong retail investors, as well as to a ôlargeö Japanese institutional investor on a discretionary account basis. Its focus will be on the bigger markets in the region: Turkey, Saudi Arabia, Egypt, Israel, Kuwait and the United Arab Emirates.
And JF Asset Management is releasing its JPM Emea Fund, with particular emphasis on Africa and its resource links to China, as well as Russia.
Executives at these fund houses say the products are not designed to time markets, but rather are filling in gaps in their existing stable of emerging-market equity products. They already offer Asia equities, global equities and Bric (Brazil/Russia/India/China) funds around the region, and now theyÆre giving other emerging-market regions their own home. And itÆs only now that they have developed a track record managing equities in these further-flung markets - except for JF, whose fund has been around since 1997, but caught its marketers' fancy.
They also say that as investors in Hong Kong and the region become more comfortable with risk, they (through distributors) are keen for more aggressive stories. ôDistributors have been asking us about South Africa for the past year,ö says Eric Fu, FidelityÆs head of Hong Kong sales for institutional and retail business.
The fund houses plan to register these products in South Korea and Singapore as well after they see how they fare in Hong Kong. In FidelityÆs case, the Mena fund has already sold well in Europe, while SchrodersÆ Middle East fund is making its debut in Hong Kong.
These æexoticÆ funds come at a time of increasing market volatility stemming from AmericaÆs subprime mortgage crisis. It will be interesting to see what degree of risk appetite remains among Hong KongÆs investors.
Fund executives acknowledge there could be short-term hiccups but argue that the strong economic fundamentals in these markets should ride out any problems. Some of these markets have histories of being less correlated to markets in the developed world. And Asian investors should be better able to keep their appetite for risk, because Asia as a region is also better protected from contagion in financial markets. ôWeÆre not as exposed to financial contagion as we were 10 years ago,ö notes Clara Law, head of retail distribution for Hong Kong at Schroders.
Regulators keep their eyes open on tightening insurance industry by introducing more detailed risk management requirements, which could bring pressure on smaller players.
China and India are more obvious choices for AustralianSuper to consider in Asia Pacific, but the super fund currently lacks the expertise and prefers to stick to the US and Europe.
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