For fund houses in Hong Kong, the prospect of HK$21.6 billion ($2.8 billion) worth of mandates couldn't come sooner, given the decline in institutional assets under management and a raft of firings in the wake of poor performance in 2008.

It was therefore a relief when the Hong Kong government established a new endowment under the auspices of the West Kowloon Cultural District Authority (WKCDA), which is charged with developing the reclamation project into a world-beating array of museums, theatres and other cultural venues.

The hitch is the Authority has yet to get a dedicated staff in place. Progress seemed to be made on June 3 when WKCDA announced the appointment of Angus Cheng -- a former exec at Goldman Sachs, Walt Disney and MTRC -- as executive director, responsible for the planning and development of the cultural district. He would report to the CEO, who continues to be recruited, and assist the board of directors in the Authority's day-to-day operations.

In addition to the CEO, the Authority still needs to hire a finance director, as well as directors for marketing, HR, museums and performing arts, plus a legal counsel and an auditor.

However, on June 17, citing personal reasons, Cheng announced he would not accept the job after all.

This means the board of directors, chaired by Ronald Arculli, one of the city's grand old men, is not expected to follow up right away on the 24-plus submissions it requested from fund managers on how to invest the endowment's assets.

The RFPs went out at the end of April, requesting fund management companies to pitch ideas on how to achieve a 6.1% absolute return per annum, which represents the return on capital calculated to keep the development project on track over the next three-to-five years. That figure assumes a 2% rate of inflation.

Although fund execs are pleased to get a shot at the business, they are privately critical of the process. "They should have gotten Watson Wyatt or Mercer in there to structure a proper asset-allocation strategy and come up with a shortlist of managers," says one regional funds CEO.

Instead the Authority wants fund managers to provide strategic advice instead, as part of their pitches. This includes coming up with solutions for budgeting risk, strategic and tactical asset allocation, choice of benchmarks and types of assets. Although the RFPs don't make this explicit, it is generally believed that strategies can use derivatives to hedge but not to generate leverage.

The RFPs were silent on fees, which must be structured into pitches. Nor did the Authority indicate how the mandates would be structured; fund execs assume there will be three-to-five mandates eventually handed out. No one knows how the original invite list of 24 managers was derived; more are expected to have submitted pitches once the business was made public.

Fund execs characterise the 6.1% annual return target as aggressive, and suggest 2% inflation may prove too low, given the calculations were made in the second half of 2008 or early 2009, the nadir of the financial crisis. Although the HK$21.6 billion is the amount allocated to WKCDA by Hong Kong's Legislative Council, some executives predict the Authority will have to request additional funding if investment managers can't meet its target.

Without a staff, however, the Authority is not going to be able to process 24 or more pitches or make recommendations to the board of directors. "We've done similar kinds of work in Europe but this is challenging because the agency is still being formed," notes one asset management CEO.