Martin Currie to launch Asia real-return strategy

The UK equity house is readying a vehicle focused on Asia Reits and infrastructure that will target institutions. Meanwhile, CEO Willie Watt praised Beijing's recent regulatory climbdown.
Martin Currie to launch Asia real-return strategy

UK funds boutique Martin Currie is preparing to launch an Asian real return strategy in the first quarter of this year, AsianInvestor has learned.

Chief executive Willie Watt said the equity manager was planning a strategy focused on Reits and infrastructure in Asia, including equities. The target date for launch is March, subject to regulatory approval.

Watt, who spoke to AsianInvestor on the back of a China trip but is based in Edinburgh, said this would be a pooled fund structure that would also be made available to institutions via segregated mandate.

He pointed to interest in income and absolute-return strategies in this region, with Chinese insurers among those it is targeting. “Infrastructure and property are long duration,” Watt noted. “Institutions [in China and Asia] want to invest abroad but keep a lot of their assets in Asia.”

Asked what Martin Currie’s priorities were, he replied: “We are very interested in China, and we want to add some more absolute-return strategies.”

Late last year AsianInvestor reported the firm had acquired a $167 million Japan long-short fund run by London-based PK Investment management and led by Paul Kirkby and his team. The deal closed on December 31 last year.

“That was to increase our focus on Japan because we felt Japan was changing,” Watt said. He did not rule out further acquisitions, but stressed organic growth was also part of the plan.

On China, he said the firm was targeting the institutional market and was less interested in the retail segment, including cross-border mutual recognition of funds, saying the firm had no plans to set up a base in Hong Kong.

“We are focused on getting to the key people at key institutions [in China],” he said, highlighting liberalisation of the insurance arena as an opportunity.

Martin Currie has offices in Edinburgh, London and Melbourne and presences in Singapore and New York. It has $11 billion under management globally, of which Watt estimates 60-70% is institutional. In 2014, the firm was acquired by US fund house Legg Mason, which now serves as distributor of its products globally.

From an investor's point of view, Watt described China as an extraordinary market part-owned by the state where stock-picking could be rewarded. He expressed hope that Beijing would learn from recent mis-steps, such as the circuit-breaker that had to be abandoned within a week of launch.

“The fact authorities said they got that wrong is good. The best thing is that regulators and policymakers learn, and hopefully they are learning,” Watt said. “It is important because people need to understand there is a consistent regulatory regime, and it has not been consistent.”

He likened China’s transition from an export-led to a consumption-driven economy to the UK’s experiences in the mid-1980s. “A lot of manufacturing was going offshore [in the UK], and there was a rolling privatisation programme of state-owned assets,” Watt recalled.

“We need China to restructure because it cannot continue as a manufacturing economy forever. Most major economies have done it. But now we [investors] are fretting over that change.”

He felt sure Beijing’s commitment to reform was strong, and that while authorities needed to improve communications with the market, he noted it had taken the US Federal Reserve a long time to get that right.

“I am sure there will be other mis-steps,” he added. “Chinese authorities are not that good at communicating with the market, but I am sure they will improve over time.”

More generally he suggested emerging-market equities had overshot on the downside based on over-reaction rather than fundamentals. “What will come out of this will be a new floor for the market," said Watt, "and then growth from there."

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