Hong Kong’s Hospital Authority Provident Fund Scheme (HAPFS) has HK$55 billion ($7.2 billion) under management and offers members a choice of six strategies with different risk profiles. Heman Wong is executive director, responsible for overseeing investments and operations. Click here for the first part of this Q&A.

Q How big is your investment team and how is it set up?

A Doris Ho is my deputy and she is director of investment. Under her there are four senior analysts. Their job is to help me do analysis to monitor our fund managers and ensure are following their investment guidelines. If they should fail to perform, at least we want to know why.

Q How many asset managers do you use?

A We outsource 100% of investments to over 20 external fund managers.

When we consider an asset class big enough that it makes sense to diversify our investment style [in that area], we have two or more managers for that portfolio. For European equities we have two, for US large-cap we have two, for US small-cap we have two, for Hong Kong equities we have five, for aggregate global bonds we have three.

But for other areas we have just one for each – such as for high-yield bonds, index-linked bonds, currency overlay, global emerging market [equities], Asian equities, A-shares and Japan equities.

Q How do you pick managers?

A First of all, we want a manager to be a specialist in one market, so we get the best of the best in that market and obtain strong alpha. We want them to have a proven, well-established, high-quality team.

If an individual or team has a very good track record at one firm but joins another, that’s not something we would buy. In the A-share market, you come across that quite often – a firm says they have hired a new team with a strong track record, but we don’t know how they will perform with the new company.

Also we generally don’t invest more than 10% of our AUM in one strategy, although there are sometimes exceptions to that.

Q What’s your view on China’s easing of the rules on accessing its capital markets, starting with the interbank bond market?

A It will definitely be a very big market in the long run, because of its size and importance. In the short run, international investors are not so interested because the renminbi has weakened a little recently. But once the Chinese economy stabilises and resumes growth – and the growth in world trade comes back – demand for RMB will return and people will want to go into RMB bonds.

Q How about the mainland equity market?

A I believe MSCI will include A-shares [in its emerging-market indices] eventually; it is actively trying to do that. In the long run, A-shares are where the opportunities are; we prefer them to Chinese bonds now.

Q What’s your reaction to Britain’s vote to leave the EU? How are you positioned?

A We have some currency hedges on for both euro and sterling, and this has protected us to some extent. We’re not too surprised to see a stock market correction given the vote. More importantly, however, I was expecting [international] stock markets to potentially pull back to their prior lows.

The low-volatility equity strategy we have invested a small percentage in should give us some comfort and, more importantly, a mechanism to de-risk further if our trustees consider it necessary.