JP Morgan Asset Management is looking to enter the mutual funds market in Australia this year, is examining onshore entry in Southeast Asia and aims to launch its first ETF in China via its joint venture.
The strategy update was provided by Jed Laskowitz, the firm’s former head of US funds who transferred to Hong Kong last August to serve as CEO of its Asia funds business and head of investment management in Asia. AsianInvestor picked him in its top 10 people moves last year.
Hosting a media lunch yesterday to announce the launch of its new financial market insights guide for Asia, which will be published every quarter, Laskowitz revealed that the firm was looking closely at Australia.
“We have an institutional presence but we do not have a funds presence [in Australia],” he says. “We will be looking more closely at entering that market.” Asked about the timing of such an entry, he replies “2013”.
In Asia-Pacific, the firm has an onshore presence in Hong Kong, Taiwan, Singapore, Korea, India, China, Australia and Japan. But he adds: “Right now we are not onshore in Southeast Asia, and that is something we are actively looking at.”
Additionally, JP Morgan AM has a joint venture with Shanghai International Trust, namely China International Fund Management – which Laskowitz notes is the 17th largest fund firm in the country with more than 300 staff.
“We did not participate in the wealth management products [suspected ponzi scheme],” he stresses. “We had a look at them and decided it was not where we wanted to focus our attentions.” But he reveals that the JV has plans to launch its first ETF there later this year.
On the market insights guide which JP Morgan AM published at the start of this year, Laskowitz says it is designed as a training tool chiefly for intermediaries to help investors, both institutions and individuals, to make fact-based (rather than emotional) investment decisions.
“Most clients I have talked to about the guide are trying to figure out ways to diversify their business. They have had too much money go into high-yield and emerging market debt," he says.
“Over the last five years money has continued to fly out of equities and most clients are vastly underweight there. It is our view that you should have a more normal asset allocation in 2013 and be prepared for more volatility.”
JP Morgan Asset Management launched its insights guide in the US in 2004 and Europe in 2007. It is sent to over 5,000 institutional investors in the US, and in this first Asia run has been delivered to about 5,000 investors, including 500 institutions.
Laskowitz describes the guide as an “ongoing, multi-year and multi-million-dollar investment that we are committed to doing for the long term. For Asia, this will be the centrepiece of all our client-investor communication across the region. It is a training tool that bankers and advisers will use with their end-clients. That is what we would like to achieve with this.”
He adds it is not designed as a promotional tool for JP Morgan Asset Management product, although he says it will be used to create portfolio discussions.
The education programme is being led by Tai Hui, who joined the firm a month ago as Asia strategist for its funds business, having previously worked as Asia research head for Standard Chartered in Singapore.
Hui’s Hong Kong-based team consists of strategists Geoff Lewis and Grace Tam, and analysts Ian Hui and Ben Luk. They are assisted by Joseph Tanious out of the US.
Presenting the firm’s market view, Hui characterises the key themes as diversification, protecting against inflation and capturing valuation. He notes that Asian investors have almost 85% of their portfolio invested in Asia, meaning they are exposed to markets that are highly correlated.
Hui points to staying in cash as a bad decision – the guide shows that between 2000 and 2007 Hong Kong saw a real return on cash of 2.6%, but that has fallen to -3.1% across 2008-12.
He believes Asian fixed income and emerging market debt has a lot to offer, despite suggestions of rich bond valuations, pointing to strong fundamentals, low government debt and healthy liquidity in the system.
This, he suggests, is supported by pension funds and mutual funds in Thailand, Malaysia, Indonesia and Northeast Asia and the growing amount of global funds mandating to invest in Asia or emerging markets. “These flows are likely to continue,” he says, noting he is also positive on Asian currencies.
Hui expresses optimism about equities from a valuation perspective, with macro worries such as the fiscal cliff in the US and a hard landing for China having “been addressed in a reasonably satisfactory way”.
He suggests the market has shown confidence in policy action taken by the European Central Bank, as shown in charts on peripheral European bond yields and credit default swap spreads.
While he acknowledges that the 2012 run for Asean equities may be difficult to repeat this year, he still likes consumer spending and infrastructure. He is waiting to see evidence that the new government of Shinzo Abe can deliver on its election pledges before becoming positive on Japan.