JP Morgan AM seeks partnerships in Southeast Asia

The global fund house is looking at opportunities in Malaysia, Philippines and Indonesia through a feeder fund structure. But it is most excited about the Hong Kong-China mutual recognition scheme.
JP Morgan AM seeks partnerships in Southeast Asia

JP Morgan Asset Management (JPMAM) is looking to expand its retail business in Southeast Asia, specifically in Malaysia, Indonesia and the Philippines.

However, rather than establishing an onshore business, the fund house is initially looking to expand via a partnership model.

JPMAM will continue to manage Southeast Asia from its hub in Singapore for now, said Michael Falcon, head of funds for Asia Pacific.

Speaking to AsianInvestor about the firm’s funds business in the region, Falcon said Singapore is its fastest growing market. It started retail business there only in 2010 but has since gained assets under management of US$4billion.

It branched out to Thailand through a feeder fund business last September and has already gained AUM of US$1.1 billion. Overall, the firm operates in eight markets in Asia and had US$1.76 trillion in AUM globally as at 31 March 2015.

“We are relatively new in Singapore but we have gained meaningful levels of assets,” said Falcon. The Singapore business, he said, is built on its strong distribution through private banks.

JPMAM won the country award for Singapore in the 2015 AsianInvestor Awards on the basis of a 62% asset growth, with multi-asset funds a particularly fruitful area. The firm has investment and distribution teams, client and functional support resources in Singapore, and a total staff of 73.

“We’re now looking at the Philippines, Indonesia and Malaysia,” said Falcon.  

JPMAM will expand using the feeder structure in new markets in Southeast Asia. Malaysia has an established feeder fund market; the Philippines started allowing feeder funds more than a year ago; and Indonesia is discussing opening the market to offshore funds.

“I wouldn’t be prescriptive about how we enter each market. We need to be strategic, opportunistic, and practical. The most important thing is to develop good relationships with strong local parties that we can work with,” Falcon said.

When asked about the region’s fund passporting scheme, Falcon said the most significant development in this space is the recently launched Hong Kong-China mutual recognition fund scheme (MRF).

Apart from the fact that JP Morgan is well positioned to participate (it has the most number of eligible funds amongst fund managers in Hong Kong), Falcon said the scheme is good for investors in Hong Kong and China. The former has demand for RMB investments and the latter has needs for investment diversification.

“Just the volatility we’re seeing in the last couple of weeks, and today in the Shanghai and Shenzhen market, speaks of the need to develop stronger foundational investment principles, access to products and better ability to manage risk."

Falcon also spoke highly of how the Hong Kong and Chinese regulators have worked together and with the industry in setting a strong foundation for the MRF program, which has gained more traction amongst fund houses compared to the Asean Collective Investment Scheme, which was launched one year ago but has yet to see a single successful fund passported within Singapore, Malaysia or Thailand.

“I think it [MRF] sets an example, hopefully globally but certainly for the region. It starts to put pressure on other markets to do similar things,” Falcon noted.

“I do think this would, in a sense, put pressure on Singapore and Asean to accelerate and expand their collaboration,” he added.

He added that while each country is interested in having a strong domestic investment capability and tight regulations to ensure investors are protected, which needs to be respected, the MRF potentially creates some more urgency at least on a regional basis for more of this type of collaboration.

JPMAM did not participate in the Asean CIS program but is participating in the MRF, which together with its mainland Chinese partner, China Investment Funds Management, has applied three funds to be approved for distribution under the MRF program as reported.

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