At present, 75% of Lion Global Investors’ AUM is made up of the portfolio of Singapore-based insurer Great Eastern Life, with third-party assets accounting for the rest. The fund manager wants to boost the proportion of third-party assets by attracting more overseas clients.
One of the briefs taken on by Gerard Lee – who joined LGI as chief executive in November from Fullerton Fund Management – is to grow third-party assets both within and outside of Singapore. Of the firm’s S$29 billion ($23.4 billion) in AUM, the bulk of LGI assets are sourced domestically.
Most of LGI’s funds are Singapore-registered, so it's planning to launch more Luxembourg Sicav funds, which are widely accepted in North Asia and Europe, says chief marketing officer Kong Siew-Cheong. This is with a view to marketing products with a particular focus on China, Korea, Japan and Taiwan, with the latter two countries expected to provide the strongest asset growth.
The firm has also started marketing to European investors, where a recent trip by LGI executives yielded significant interest in its proposed Sicav bond funds. LGI’s European marketing focus is on countries such as Germany, Scandinavia, Switzerland and the UK, says Kong, although “it is very early days”; it started its European efforts just six to nine months ago.
LGI is likely to leverage its fixed-income expertise in particular, given that about 60% of its AUM is invested in that asset class, says Kong, who declined to reveal more details of its planned products.
“We have been focusing quite a bit on bond funds,” he says. For example, LGI in October launched a dollar-denominated Emerging Markets Bond Fund, which is up 4.6% year-to-date as of the end of May.
Kong notes the continuing development of the Asian bond markets, suggesting that average Asia ex-Japan US dollar credit issuance of sovereign, investment and high-grade corporate bonds is likely to rise from $75 billion in 2010 to more than $100 billion this year.
He believes China will account for over 40% of regional issuance over the next two to three years. That said, one has to be “very selective” when buying Chinese corporate bonds, adds Kong.
Meanwhile, Singapore government securities will be offered on the Singapore Exchange from July 8, which he sees as a very good development, particularly for retail investors. He says LGI would prefer to buy bonds direct from the issuer, given that it has the scale to do so.
One customer segment that is becoming increasingly active in taking up issues is private banks, particularly in the high-yield space, says Kong.
One product LGI has no immediate plans to launch is a renminbi-denominated bond fund, after a “long debate internally”. Kong argues that such products are less attractive for investors in Asian countries with faster-rising currencies than the renminbi. For instance, the Singapore dollar has strengthened by 2% against the RMB year-to-date, he adds, and is likely to continue to do so.
Moreover, comparing the differential between the offshore rates for RMB and CNH issues, rates are artificially low for CNH bonds, because issuers are not paying up, says Kong. “Investors are not being paid to take the risk [of buying CNH bonds],” he adds.
Hence RMB funds are “not compelling” for Singapore-based investors, says Kong, adding that other Asian currencies have performed better and should continue to do so. That said, at least two firms have launched Singapore dollar-denominated RMB bond funds: Barclays Capital Fund Solutions and UOB Asset Management.
“Longer term, we may need such a fund,” says Kon Chee-Keat, LGI’s head of fixed income, “but we can wait for the opportunity.”