HSBC Asset Management has begun selling fund of funds products to HSBC bank retail investors in Asia. "The multi-manager industry is the fastest growing segment in the funds industry worldwide," says Andrew Leung, regional head for the firm's multi-manager unit in Hong Kong.
Cerulli Associates has calculated that multi-manager assets under management have enjoyed a compound annual growth rate of 8% since 1999 despite a general industry downturn. The research group predicts at this rate, global AUM will hit $770 billion by 2007.
HSBC-AM formally established its multi-manager team in 2000. It now boasts 17 full-time analysts located in New York, London, Paris and Hong Kong, led by Simon Moules, the London-based CEO of the multi-manager team, which now oversees $4.7 billion in assets under management.
Leung says the multi-manager concept, popular in the US and rapidly gaining credence in Europe, is now coming to Asia. Customers want choice and know that no single fund house is best at everything. They can either buy funds from multiple channels, or, more conveniently, they can go to one distributor for a fund of funds, and let a professional worry about portfolio rebalancing.
Only a handful of competitors have offered a multi-manager product to retail investors in this region; Russell, for example, has raised around $500 million from Singapore's retail market for its multi-manager strategy, via a partnership with DBS. Skandia Global Funds has also tried to market a multi-manager product in Hong Kong. Otherwise, in this region, it has remained a strategy for institutional investors or private bank clients.
He says although HSBC Asset Management does take a fee for that role on top of the usual management fees for the underlying funds, the firm uses economies of scale to negotiate discounts. Total fees for the multi-manager product range from 1.15-1.25%, depending on the equity content. HSBC-AM is offering three funds of funds with different balances between equity and fixed income, each with 20-25 underlying funds.
Leung claims the product is "completely open architecture" and that the firm isn't pushing HSBC-AM products, although he wouldn't say what proportion of underlying funds are HSBC-AM ones. He does say the multi-manager team researches about 1,000 funds that meet initial quantitative requirements, of which 200 are deemed eligible and about 60 are endorsed.
The regional push began early this year in Taiwan after regulations changed late last year to allow onshore funds to invest in registered offshore funds. HSBC launched its range in March and raised NT$2.2 billion ($66 million). Those funds have a local fund manager but Leung's group in Hong Kong is acting as the investment advisor.
Now the organization is promoting its basic range of funds of funds to Hong Kong retail investors that have what HSBC deems a 'long term' horizon - at least one year. If this is a success, Leung will consider registering in Hong Kong a high-yield version now sold in the UK.