Manulife Asset Management has hired Sarah Lu from Axa Rosenberg Investment Management Asia-Pacific in a newly created role as head of asset allocation for Asia.
This is the first time a member of its global asset allocation arm – the 20-strong portfolio solutions group (PSG) – will be located in the region. It already has a presence in the US, Canada and UK.
Lu started this week and will be based in Hong Kong, although she is undergoing training in Boston now to better understand the firm’s investment process for handling asset allocation.
Manulife’s portfolio solutions approach was established in the late 1990s by Bob Boyda, co-head of global asset allocation, and now oversees more than 100 portfolios. Its solutions include target-date, target-risk and target-income funds, alternative and international asset allocation portfolios, and customised solutions for corporate pension plans.
Overall PSG accounts for about $90 billion in AUM globally, including allocating to external funds. Of this, Asia-Pacific contributes $5 billion, over $4 billion of which comes from lifestyle funds in Hong Kong’s Mandatory Provident Fund retirement scheme under three core approaches: aggressive, moderate and conservative. These products combine strategies and capabilities in an effort to address volatility while providing a target level of income.
Manulife Asset Management, which itself manages $220 billion, is the named portfolio manager on the firm's existing asset allocation products in Asia. But as the firm's first dedicated asset allocation specialist in Asia, it is the firm's intention to put Lu's name as portfolio manager in the future, pending approval.
Asked if Lu would have a hiring mandate, Michael Dommermuth, Hong Kong-based president and head of Asia for Manulife AM, says: “I believe the team is going to grow and is going to have to grow from here. We are already seeing the phenomenon of demand for income-orientated products. This is part cyclical, but it is clearly part secular as well.
“The fact that pension regimes across Asia provide retirement income levels that are generally lower than OECD standards means there needs to be another form of retirement income. We think the long-term secular need is only going to grow.”
He references the region’s aging population, noting research that North Asia is more aged than South Asia. He believes the growth in income orientated products will largely be a retail story.
“Some of the technology and trends that you see developing in Japan will be exported to places like Korea, Hong Kong, Taiwan and China, which are all catching up in terms of the proportion of their population which is elderly,” says Dommermuth.
He suggests that youthful South Asian nations such as the Philippines, Indonesia and even India are going to see a tripling or quadrupling of the percentage of their populations considered to be aged.
“That is going to put pressure on existing pension regimes, so you are already seeing renewed focus on defined contribution schemes, for which lifestyle-type products are a feature,” he says.
“For example in Malaysia Manulife has just received approval as one of the providers of the Private Retirement Scheme (also see AsianInvestor’s February 2012 issue). A feature of that platform will be lifestyle-type products.”
Dommermuth confirms that income-orientated products will be a key feature of Manulife’s strategy in future. “From my perspective, successful asset management companies that recognise this aging trend are going to focus on a complete suite of product capabilities oriented towards this aging populace who are concerned about retirement security,” he says.
A spokesperson for Axa Investment Management in Hong Kong declined to comment when asked whether Lu had been replaced.