US-based Morningstar offers research on around 15% of fund assets in Hong Kong, Singapore and Taiwan, but aims to raise that figure to 70% within two years and achieve a similar level of coverage in China, India and South Korea at some point.
To that end, the firm has hired Sunny Ng in the newly created post of Asia director of fund research in Hong Kong. Starting this month, he will oversee Morningstar’s qualitative fund research activities in Hong Kong, Singapore and Taiwan, and will look to expand them elsewhere in the region.
Ng was previously head of alternative research at Brockhouse Cooper, a Canadian institutional consulting firm. He has also worked at AllianceBernstein Institutional in Toronto.
His appointment follows that of Grant Kennaway, who will start in October in the newly created role of Asia-Pacific head of fund research in Sydney. He was previously general manager of research at Lonsec, an Australian investment research and stock-broking house.
Kennaway will initially focus largely on Australia, and will later start looking at how to help the company expand in Asia, from a high-level, strategic point of view.
Ng reports to Kennaway, Nick Cheung, Hong Kong-based regional general manager, and Chris Traulsen, London-based head of the global ratings committee and Europe head of fund research.
Ng's focus will be on building out the coverage in the Asian markets where Ucits funds are heavily sold – namely Hong Kong, Taiwan and Singapore. Morningstar also has research operations in mainland China, India and South Korea, and will be looking to expand coverage in those markets as well.
The firm will be increasing its equity and fixed-income (but not money-market) funds coverage, as well as that of new types of funds. This may include alternative investments such as hedge funds, says Ng, although they are not likely to be the primary focus for the time being.
"In terms of how quickly we plan to expand coverage, we recognise there is a trade-off between speed and breadth versus depth and quality," he says. "I will initially be much more focused on ensuring we continue to produce best-in-class research in these markets.
"This being said," adds Ng, "given our increased efforts in the region, we expect we will be able to ramp up coverage and become a significant player relatively quickly – within the next year or two."
Morningstar has a different model from that of consultants such as Mercer and Towers Watson, which chiefly target pension funds. The firm's client base largely comprises fund managers and distributors – in Hong Kong, for example, the firm counts DBS and HSBC among its customers.
It did, however, gain Singapore’s Central Provident Fund as a client in March 2008 and carries out fund screening for the state retirement fund’s investment scheme.
Another area of focus for Morningstar is improving retail funds sales practices. In Australia, the UK and the US it has been very active in lobbying on issues such as fees, investor rights and clarity of documentation, says Ng.
The firm is doing the same in Asia. For example, it’s not mandatory to have portfolio managers’ names in fund prospectuses in Hong Kong – that's something Morningstar wants to see change.
The company publishes a Global Investor Experience report every two years, whereby it rates countries on fund-selling best practice; the latest was published earlier this year.
Meanwhile, Morningstar will by the fourth quarter shift its qualitative rating scale for funds in Asia and Europe to a new global fund rating scale applied to funds worldwide. In addition, it will move to a globally uniform approach for fund research reports.
The new rating process evaluates funds across five 'pillars' – people, process, parent, performance and price – and considers both numeric and analyst-driven factors. It puts only partial weight on past performance and will now be more responsive to significant changes at a fund or parent organisation.