Lion Global Investors is mulling whether to launch an Asian convertible bond fund after registering two Luxembourg-incorporated, Sicav-structured Asian bond funds in Singapore.
The firm, a member of the Oversea-Chinese Banking Corporation (OCBC), says its Asian High Yield Bond Fund and Asian Local Currency Bond Fund are now available to investors in the Lion City. They were launched on June 1 and June 17, respectively, in Luxembourg.
Kon Chee Keat, Lion Global’s head of fixed income and structured assets, notes the broad-based appeal of both funds, for which the firm is targeting a return of 6-10% (it puts the wide range down to extreme market volatility). The target size for both is upwards of $200 million.
Lion Global has prioritised expanding its third-party asset base, given that the portfolio of Singapore-based insurer Great Eastern Life makes up 75% of its AUM.
It is seeking to create a distribution strategy around its Ucits label, and describes its move into Sicav funds as part of a strategic plan to gain an international foothold outside of Asia-Pacific.
Luxembourg-based LGlobal Funds, a firm managed by Lion Global, is providing investors outside of Singapore access to its Asian bond funds, which are being marketed in Europe and Asia.
And in an announcement yesterday, BNP Paribas Securities Services said it has been selected by Lion Global to launch its Ucits-structured funds and support its global fund distribution strategy.
Lawrence Au, head of Asia-Pacific at BNP Paribas Securities Services, suggests Asia-based asset managers require an integrated international solution to capture flow from Europe and across Asia in a changing marketplace.
Lion Global’s chief marketing officer Kong Siew Cheong says the firm is seeing strong appetite for Asian bonds in Europe and North Asia. “It’s a logical and timely step for us to offer Luxembourg-domiciled Sicav funds for global investors to capitalise on Asia’s growth,” he says in a statement.
Kon notes that while emerging market local currency bond funds have seen consistent inflows over the past two or three years in the wake of the financial crisis and concerns over developed sovereign debt, the past week or so has witnessed a sell-down. However, the firm argues that the macroeconomic fundamentals remain supportive of Asian currencies relative to the US dollar and euro.
“Maybe over the next few months we may see some outflows,” says Kon. “This is quite technical, partly because of profit-taking. Unfortunately the window is so small and everyone starts to liquidate."
Kon describes convertible bonds as an interesting market. “We did not realise that the CB market would come and offer better value over the past one or two months," he adds, confirming that Lion Global is considering launching an Asian convertible bond fund.
Asked if he feels the eurozone debt crisis is driving money towards Asian fixed income, Kon replies: “Technically it is. The market sold off because banks and funds are de-risking their portfolios given current uncertainty in the eurozone. On a short-term basis you may see a further correction.”
Kon is of the opinion that Greece is already technically in default, and says the question is more about what kind of haircut there will be.
“In my opinion the market is already pricing in some form of restructuring of Greek sovereign debt. The anxiety is due to the low visibility surrounding the details of how the debt will be restructured and whether there will be further contagion into the rest of the eurozone economies.”
Lion Global has 14 fixed income staff, including Kon, managing around $16 billion ($12.7 billion) in assets out of an overall AUM total of S$29 billion as at June 30 this year.
Lion Global’s Asian High Yield Bond Fund is being managed by Veronica Ng, team leader for Asian credits, while its Asian Local Currency Bond Fund is run by Goh San San, the firm’s team leader for Asian local funds.
Both funds are available to retail and institutional investors through Lion Global’s distribution partners. The minimum investment amount for Class A shares is S$1,000 or $1,000.