Fund distribution in China is high on many investment firms’ Asia priority list, in light of the looming Hong Kong-China mutual recognition scheme – and Principal Global Investors is no exception.
The US fund house says it has been very active in this regard, meeting foreign banks operating in China and exploring distribution options via its mainland joint ventures. It has also made a number of appointments with a view to these plans.
While no formal timeline has been set for the mutual recognition scheme, senior regulators recently said it is in the final stretch, and market consensus is that an agreement will be in place before the first quarter is out.
Principal's joint venture with China Construction Bank (CCB), CCB Principal Asset Management, is a rich vein to tap into, says Andrea Muller, PGI’s Asia chief executive. One of the largest fund distributors in China, CCB could be one avenue for selling PGI’s range of HK-domiciled funds to mainland retail and institutional investors.
Principal has nine retail funds domiciled in Hong Kong, and expects to add another two soon. And CCB Principal itself has 39 mutual funds that will be available for sale in Hong Kong once the recognition scheme is in place.
“If approved by both regulators, that could be significant distribution [for us] in China,” Muller tells AsianInvestor. “In addition, we will review the JV’s funds to determine suitable distribution in Hong Kong. Our JV provides us important insight to investor appetite on the mainland.”
PGI is also in talks with foreign banks – including Bank of East Asia, Citi, HSBC and Standard Chartered – about distributing both its Hong Kong and Ucits funds on the mainland.
The mutual recognition scheme has brought Ucits’ future into question – some CEOs have gone so far as to say the structure may become irrelevant, if the proposed Asian passport schemes take effect.
Muller dismisses this, arguing that there is enough demand for both HK and Ucits products, at least for now. “I don’t think Ucits will die. Mutual recognition is one avenue, but not every fund manager will want to domicile funds in Hong Kong. Ucits will continue to be an important vehicle in many markets.”
Meanwhile, PGI is eyeing the renminbi qualified foreign institutional investor (RQFII) programme. The firm has considered applying for an RQFII licence, which would allow it to invest directly into Chinese equities and bonds onshore using offshore renminbi.
PGI also has the other passport plans on its radar, with Muller highlighting the Asean scheme in particular, which aims to enable cross-border mutual fund distribution between Malaysia, Singapore and Thailand. The other recognition scheme on the table is the Asia Region Funds Passport, backed by Australia, New Zealand, Singapore and South Korea.
Although it will likely be years before cross-border mutual fund sales take off in Southeast Asia, she says Principal is in a good position, again because of its joint ventures in the region. She points to its JV with CIMB Group in Malaysia, CIMB-Principal Asset Management, as an example.
All these impending schemes have resulted in a number of senior hires across both its investment team and distribution platform in the past few months.
Lim Kee-Yap joined on January 3 as head of institutional sales for Southeast Asia. Based in Singapore, Lim moved from Absolute Asia Asset Management, a boutique Asian equities manager under Natixis Global Asset Management’s umbrella, where he was marketing director. He previously worked at Wellington and Citi.
Lim replaced Sameer Dev, who left in May to join Deutsche Asset & Wealth Management as head of its Southeast Asian institutional coverage.
Lim’s arrival followed the September hire of Jane Fung from Old Mutual Global Investors as head of fund distribution in Asia based in Hong Kong.
PGI named Paul McConomy as chief administration officer for Southeast Asia and the Middle East on January 1. Based in Singapore, he oversees legal and compliance for these regions. Previously these responsibilities fell under Asia COO Frederick Laydon’s remit, but Laydon will now solely focus on legal and compliance in China. Laydon is based in Hong Kong.
McConomy has been with Principal Financial Group, PGI’s parent company, since 2002, most recently serving as COO for CIMB-Principal Islamic Asset Management in Malaysia. He previously spent eight years as regional counsel for Principal International Asia in Hong Kong.
Meanwhile, the firm’s real estate arm, Principal Real Estate Investors, appointed two portfolio managers, Koh Shern-Ling and Julian Mittag, to the four-strong property investment team in Singapore on January 6. PGI plans on hiring two more junior analysts to support the real estate portfolio managers.