Legal & General Investment Management is moving towards running Asia-focused strategies locally, given its plan to build an investment team in Hong Kong. The UK fund house currently makes its allocations to the region from its London headquarters, but that ultimately looks set to change.
Last week LGIM announced the hire of passive product specialist Paul So to the newly created role of head of index funds for Asia Pacific, with a mandate to add staff.
He was previously head of beta products at Enhanced Investment Products. The Hong Kong asset manager is said to have replaced So with exchange-traded funds veteran Fred Jheon, effective as of early June.
Some suggest LGIM may look to domicile funds in Hong Kong at some point. Following the likes of BlackRock and Vanguard down this route would be a “smart move”, says one industry veteran, as it would allow LGIM to sell funds into China under the proposed mutual recognition agreement (MRA).
That said, the firm's main focus is institutional business, and the MRA scheme is largely retail market-focused, so it is likely to be a while before that happened, if it is on the cards at all.
So started on May 2 as LGIM’s first portfolio management executive in the region and has a mandate to build a team of index portfolio managers and traders. The firm already has a researcher on the ground in the form of Horace Hung, senior credit analyst for emerging markets.
The firm declined to give a time frame on when it expects to make further hires.
Joining a 50-strong team of index investment specialists globally, So reports to Ali Toutounchi, global head of index funds, and Alan Flynn, Asia Pacific head.
LGIM, which now has an eight-strong team in Asia, already provides index management services to a number of large Asian institutional clients. This includes two sales executives, led by Janice Wu, who came on board last July from State Street Global Advisors.
The firm's long-term strategic objective is to expand its international footprint, and Asia is a major component in that strategy, says Flynn.The firm's focus in the region continues to be the marketing of index and active fixed income UK-domiciled pooled vehicles to Asian institutional investors, he adds.
“We are seeing growing interest in both market-cap and alternatively weighted index strategies from sovereign wealth funds and large pension funds across the region,” Flynn tells AsianInvestor.
Most of LGIM's assets are in index funds – with institutional clients the main focus – but it has said it is also considering offering ETFs.
The fund house has $440 billion in index portfolios managed for more than 3,000 pension and institutional clients in Europe and the Middle East, he says. “We believe the same factors will enable us to grow our index business in Asia and North America too.”
EIP declined to confirm Jheon has joined, but it points to the new hire’s “proven track record in establishing ETF businesses in new markets and listing new products globally”. This fits with his career experience.
Jheon was most recently founder and CIO of Emimco Asean Select Capital, a firm he set up in April last year. Before that, he spent five years as managing director at ETF Securities, a UK-based ETF provider that opened an office in Hong Kong in 2012. He also worked for eight years as an iShares portfolio manager at Barclays Global Investors before it merged with BlackRock.
So has spent the past 10 years of his 15-year asset management career managing index funds. Before his four years at EIP, he was a director within the portfolio management group at BlackRock and its previous incarnation Barclays Global Investors (BGI).
He looked after transition management and equity index products at BGI in Canada before relocating to Hong Kong in 2007. So started his career as an analyst at Mercer Investment Consulting.
LGIM set up an Asia office in Hong Kong in mid-2012 and officially opened it in July last year, headed by Flynn and with Richard Surrency, formerly of Morgan Stanley, overseeing sales. Surrency has since left the firm to join alternative investment manager Algebris in Singapore, as reported.