Old Mutual Global Investors (OMGI) has hired Richard Mo, formerly head of China retail at JP Morgan Asset Management, to spearhead its plan to establish itself among mainland institutional and high-net-worth investors.
Mo joined the UK fund house on Monday in Hong Kong in a newly created role as head of China business, reporting to Carol Wong, managing director for Asia Pacific. He will, initially at least, be the only person in OMGI’s China division.
“OMGI has nothing in China, so it’s like a clean sheet of paper for us,” Wong told AsianInvestor. “China is the second largest economy in the world, and there is strong demand to invest offshore. Richard knows the market well and can help formulate strategies on what is the best way to enter China.”
Mo had been at JP Morgan AM for 16 years, most recently as head of China retail business. Wong said the hire had involved an intensive period of negotiation, which began with the firm speaking to Mo and other candidates in late 2015. He left JP Morgan AM at the end of 2015 and was replaced by Henry Tong, head of Hong Kong private bank distribution.
Mo’s appointment brings OMGI’s Hong Kong team to 16 people; up from seven when Wong herself joined in November 2013.
She noted that the company would wait before committing more personnel to cover China. “After Richard’s hire we will discuss our strategy and see how it goes. If it’s needed and successful, we will probably look to add more staff.”
OMGI is considering various options to establish itself with China’s fund distributors and asset owners, including establishing a wholly foreign-owned enterprise. Wong said it intended to have decided on its plan by the fourth quarter of this year.
Asked last month whether the firm would participate in the Hong Kong-China mutual recognition of funds scheme, Wong had said it would need to domicile funds in Hong Kong first, which would not happen this year. OMGI does have fund managers based in Hong Kong and retail funds registered for sale in Hong Kong and Taiwan. Most of the products its sells in Asia are Ucits vehicles.
The company’s interest in gaining China business is part of a broader desire to build in Asia, after being a late entrant into the region. OMGI only branded itself as such in 2012, after being formed by the merger of Skandia Investment Group and Old Mutual Asset Managers.
It has since sought to aggressively expand in the region, initially in Hong Kong, Taiwan and Singapore. Most recently it hired Gerard Clancy as head of sales for Southeast Asia in July as part of a push to build business in Malaysia and Thailand as well.
OMGI believes it can use its alternative funds in particular to attract institutional and retail investors in Asia. The company operates a number of sizeable alternative products, including its $7.5 billion Global Equity Absolute Return Fund, a low-volatility strategy that targets a return over cash. It has returned an annualised 4.7% in US dollar terms since launch in 2009.
Wong, who has covered Chinese investors herself, said it was tough to speculate which part of China’s market could offer OMGI the best growth opportunity.
“China is very dependent on government regulation; if it suddenly opens up some channels, we could see some very positive developments,” she noted. “It also depends on the renminbi’s direction; a couple of years ago everybody expected the RMB to appreciate, so it was hard to get them to buy offshore funds. But now lots of people feel there is room for it to depreciate, so it’s more mixed."
Certainly, southbound (China to Hong Kong) flows via the Shanghai Stock Connect have grown fast in recent months, with the weakening yuan seen as one of the drivers of mainland demand for offshore investments.
Wong declined to reveal how much AUM the company has in the region, saying only that “it’s not big, as it has come from a small base, but has been growing significantly over the past two years”, with private banks proving to be a particularly successful distribution channel.
However, Wong is focused on growing the company’s regional AUM by three to five times over the next three years. “We aren’t aiming to be BlackRock or Fidelity, but we want to provide the best solutions to our clients,” she said.