AsianInvestor’s top marquee award winners

When it comes to appealing to affluent investors, Citi remains the bank to beat.

The bank enjoyed a good year in 2017. Investment sales grew by over one third, while its investment AUM expansion was almost 20%. Citi’s regional AUM was well over $200 billion, most of which comes from consumer bank customers.

Citi has no in-house fund operation to support, so its fund selectors are particularly rigorous and will drop funds that appear to have lost their mojo or not be best-set for upcoming market conditions. Over half the funds it picks are made available to premier customers.

Other services include Citi helping its clients measure their correlation risk on both investment holdings and other investments such as company stock or real estate holdings. That way market shifts are less likely to have surprising effects on their net worth. This aligns with Citi’s Total Wealth Advisor advisory platform, which builds model portfolios for customers, helps clients set long-term investment goals and lets them know if they are falling behind their objectives. 

Citi is also offering multi-asset products, which have gained $3 billion in AUM from their launch two years ago. It is next planning a digitised advice service, which will give mass affluent investors a handful of asset investment options.

While some banks seek to expand into mass affluent customers, Credit Suisse is focused on the very rich.

The bank’s regional operations enjoy autonomy from head office. About 80% of Asia’s wealthy still consist of first generation business owners, so Credit Suisse seeks to meet their investment banking needs and then help invest the money they make, via personalised services and support such as leverage for investing.

Last year the strategy worked well. Credit Suisse grew its Asia Pacific wealth management and connected division revenue by 22%, underpinned by a 29% rise in transaction revenues and 19% increase in recurring commissions and fees. According to its full year 2017 results, the unit expanded AUM from SFr166.9 billion ($170.6 billion) in 2016 to SFr196.8 billion last year, while keeping its cost to income ratio at 64.9%.

The bank is focusing on offering more generational wealth advice, and expanding its digital advisory platform, which gives regional clients more portfolio transparency. The service launched in Thailand and Australia last year. Credit Suisse is next focusing on clients’ onshore needs, such as tax reporting and local investing options.

Plus it aims to broaden Credit Suisse Invest, a new structured advisory service in which clients pay for the level of service they use.

When it comes to overall asset service coverage, few can offer as rounded a set of services as Citi.

The US bank saw barely any client defections at all during 2017; instead, a succession of new client mandates and additional business from existing ones helped it expand assets under custody by more than 20% to reach over $2 trillion in the region, from more than 500 clients.

The US custodian gained a set of new custody mandates last year, including from a Chinese asset manager and a large ETF manager for custody and fund accounting work, and was picked as the middle-office solution provider to a major global asset manager, one of the largest regional mandates.

On the institutional side it was appointed by a regional central bank to provide a set of bespoke US custody services.

Other highlights included Citi creating the first truly local global custodian service in Taiwan, a notable achievement at a time when the island’s regulator is focusing on building up its local fund managers. Plus it launched a Sharia-compliant global custody service, to service fund houses in Malaysia, Indonesia and the Middle East.

Citi has made technological progress too. It launched Proxymity, a digital proxy-voting platform, which looks set to be rolled into Asian markets throughout this year. Plus it rolled out Velocity Clarity, which uses big data access and visualisation tools to let funds analyse portfolio performance across multiple investments.

Added to all this, Citi remains the leading agent lender, and it was one of the first banks to support Bond Connect trading and settlement.

As a long-short investor, Zeal values identifying and getting to know companies a little off the beaten track. For eight years now, that approach has netted positive returns. It also helped it become one of just three managers to distribute a Hong Kong unit trust—the Voyage China Fund—to Chinese investors via the mutual recognition of funds scheme in 2016. Last year was good for the whole market, but Zeal’s core China hedge fund returned 32.15%, above even the median return of 29.5% of its peers. It did so by buying into lesser known tech stocks that performed at least as well as mainstream names. Its AUM rose from $232 million to $313.6 million at the end of 2017.

Zeal’s overall AUM soared from $772 million to $1.42 billion during 2017; 83% up on the back of good returns and successfully attracting more investors into the Voyage China fund. This was partly down to Zeal teaming up with fund platforms such as Hexun and JD Finance in China; plus it gained over 270,000 retail customers via Ant Financial.

It was also down to good returns; the Voyage China Fund returned 42.81% in 2017, while it AUM expanded from HK$1.94 billion to HK$3.03 billion.

Infrastructure is an increasingly popular field, especially for institutional investors, and CapAsia has positioned itself as a prominent player in Southeast Asia. Over the past decade, CapAsia has established offices in Singapore, Kuala Lumpur and Jakarta, which helps it invest into companies across sectors including renewable energy, toll roads and telecom towers. It then advises them on optimising capital structures and improving operating systems and governance. 

The fund has over $500 million AUM across three funds, which includes over $250 million across various infrastructure sectors. It posted a gross internal rate of return of 17.6% for its first 10 year fund, which ended in 2015. Its second $227 million fund got backing from the Asian Development Bank and Islamic Development Bank, and its IRR was around 12% as of September last year.

CapAsia’s latest fund had a vintage year of 2013, and has made four investments so far. In January last year the fund and its partner, Malaysia’s OCK Group, acquired Southeast Asia Telecommunications Holdings, Vietnam’s largest telecom tower operator, for $50 million. CapAsia followed this by selling its 40% stake in a 36 megawatt wind farm in the Philippines to Thailand’s BCPG for around $28.5 million in May.

It now looks well positioned to benefit from China’s Belt and Road initiative.

International asset managers are leery of the competition Chinese firms could offer. Haitong International Asset Management helps explain why.

The fund house has existing bonafides, having launched the first Global RMB fund, while some of its products feature in Hong Kong’s Mandatory Provident Fund scheme. Over the past five years it raised AUM from HK$5.8 billion ($740 million) to HK$66 billion as of December 2017, an annual compound growth rate of 63%. It’s now one of the largest Chinese fund houses in Hong Kong.

Last year Haitong International restructured its Hong Kong team and hired two new members to bring the total to six. It also redesigned its marketing materials and redefined its client coverage, to improve its internal efficiencies.

This helped it launch 10 new funds, seven of them Cayman Island-domiciled, while also raising over $1 billion in new assets for its flagship multi-tranche fund. It sourced new assets by marketing to wealthy investors in China and selling funds via private and wealth management operations in Hong Kong. Haitong International now has over 30 partners helping sell its funds. Its next plan is to launch three new public funds this year.

In 2017 Hong Kong finally introduced leveraged and inverse ETFs, after lengthy consideration by the Securities and Futures Commission. CSOP Asset Management was quickest to the chase.

It beat out four rivals in this space to launch four L&I products. These built a total market share of HK$1.2 billion, or a 40% market share, while enjoying over 50% of total average daily turnover.

The fund manager partnered with ICBC to build sales in its smart beta ETF that focuses on new sectors in China. It listed in late 2016, and gained $150 million of asset inflows by late 2017. The ETF returned over 55% last year, outpeforming all Greater China-themed mutual funds. CSOP also owns the largest renminbi-QFII ETF, which benefitted from MSCI’s announcement in June 2017 that it would include A-shares from this year. The fund house ensured Rmb1.5 billion of inflows into the ETF.

In addition, CSOP’s RQFII fixed income ETF (the China Five Year Treasury Bond ETF) appealed; CSOP recorded Rmb700 million of asset inflows last year, making it the dominant product in this part of the market. Next up, CSOP is planning for the launch of ETF Connect. 

Finding longstanding fixed income products that can capture the attention of retail investors through consistent performance is not easy. But Value Partners’ seven-year-old Greater China High Yield Income Fund shows it can be done.

The fund invests into offshore Chinese high yield bonds, and over the past five years its astute investments helped it return an average annual yield of 8.1%. That performance helped the fund net over $1 billion in net inflows in the first half of 2017 alone, while its AUM grew to $4.5 billion at the end of 2017. The product is a favoured high-yield fund among local, Chinese and international retail and private banks.

Value Partners’ fixed-income team combines top-down and bottom-up analysis when analysing credits, and it considers research from the equity side, to better analyse individual credit risk. This also includes qualitative analysis of the company management and quantitative consideration of credit metrics, cash flow and other key factors.

The investment team use this to invest into some lower-rated credits they feel are underpriced. Doing so supplies alpha; while high yield bonds returned 6.9% last year, according to the JP Morgan Asia Credit Index, Value Partners’ fund provided a 10.9% return.

Environmental, social and governance standards are gradually gaining traction in Asia, but the limited knowledge of institutional investors means many rely on advisers. Hermes EOS has been a leading light.

The firm, which offers stewardship and ESG analysis advice to corporates and investors alike, engaged with 97 companies in developed Asia during 2017, of which 43.1% were on a governance basis, with 23.2% for strategy, risk and communication.

This has included offering views to fund managers such as Japan’s Asset Management One, which employed Hermes EOS to give it ESG advice to create ESG-compliant funds during 2017.

On the corporate side, Hermes EOS suggested Taiwan’s Uni-President Enterprises align its business objectives with the UN Sustainable Development Goals; it subsequently set up a corporate social responsibility working group. Hermes EOS also engaged with Japanese automaker Nissan over CEO succession planning and its concern over the company’s combined chairman and CEO role; its leader relinquished the latter position last year.

In Hong Kong, Hermes EOS gained more access to the board of directors of conglomerates CK Hutchison and Jardine Matheson, which had previously been difficult to achieve.

Hermes EOS also made clear it didn’t support the introduction of dual class share structures in the Hong Kong and Singapore exchanges in the consultation responses to the plans by both bourses.

Shifting fixed-income market conditions are leaving many investors wondering how best to manage their fixed income allocations. Western Asset Management demonstrated in 2017 that there was alpha on hand for investors willing to countenance a contrarian approach.

Its set of unconstrained fixed income strategies has offered interesting total returns for several years now. But the pick of the bunch is the most aggressive, its Macro Opportunities product.

The fund takes a dynamic approach to investing, able to invest up to 50% of its assets outside the US, or into high yield debt, or into emerging markets. It aims to utilise high-yield debt, foreign exchange differences and rate movements to generate better returns.

The approach netted a 16.05% return last year, in large part on the back of global risk assets and astute fixed-income trading. It did so in part by being non-consensus, and buying into local currency emerging market debt, which benefited during the year from strong growth fundamentals and disinflationary forces.

For institutional investors that took the plunge—and with $15 billion of AUM, there are quite a few—the strategy remains a useful generator of superior, albeit volatile, returns.

As institutional investors across Asia Pacific continue accumulating assets, servicing their needs is a key growth area for asset managers. Goldman Sachs Asset Management (GSAM) is ensuring it is a key beneficiary.

The US fund house received over 70 new mandates in 2017 from an array of institutional investors, including insurers, pension funds and sovereign wealth funds. Key successes included emerging market debt, where GSAM enjoyed several hundred million dollars of inflows from new mandates. It also gained extra business from one of the region’s most sophisticated SWFs, adding an array of alternatives mandates, including for private debt and private equity.

GSAM is one of the largest managers of insurance assets globally, and it utilised this to add new business in the region last year. This included over $500 million of private equity and private credit mandates from a major Chinese insurer. It also raised its allocations with a regional insurer by $2 billion to over $12 billion; gained several fixed income mandates from Korean insurers that totalled $600 million and received more than $600 million in business from Taiwanese insurers into its private credit fund.

All-told, the US fund house’s regional institutional assets under supervision rose by close to 20% during 2017. GSAM remains a powerful player in this space.

As the alternatives space has grown in importance with investors, so has their need to find experienced players to work with. LGT Capital Partners remains a leading example.

Last year was a big year: the fund manager raised $4.8 billion of assets in private markets and $6.2 billion across all asset classes, taking its total AUM to $60 billion. The fund picked up assets from clients across an array of Asian countries and different investor types too, including pension funds, insurers and asset managers.

The firm is popular because it delivers. Its Asia team have generated strong IRRs for regional investments. The firm has 31 employees in the region, including three recent hires in Hong Kong. It hasn't lost a partner since its inception in 1999.

As part of its ongoing business improvements, and in response to institutional investor queries, LGT Capital Partners engaged with private equity and hedge fund managers on ESG last year, and it carried out detailed ESG analysis on its portfolios.  

LGT Capital Partners held a final close of its flagship Asian private equity fund, Crown Asia-Pacific Private Equity III in January 2017 at $587 million, 47% above its original target. Its next fund, CAPE IV, launched in December and is getting strong interest too; it had gained over $400 million by its first close in the first quarter of this year.

Look out for the final awards winner story from AsianInvestor, in which we reveal the winners of our COO of the Year, top alternative asset class categories, and our Asian Fund House and Asset Manager of the Year awards.