Dutch asset manager Robeco has sought to affirm its commitment to Asia by setting out a multi-pronged strategy centred around China, a week after the news emerged that its regional chief had resigned.
The firm, which sources $8 billion (or 3.1%) from Asia-Pacific clients out of $255 billion in global assets under management, hosted a media lunch in Hong Kong yesterday to outline its plans. This came ahead of an annual client conference, the the first time Robeco has staged the yearly get-together in the city.
Hester Borrie, global head of distribution and marketing, who is overseeing the Asia-Pacific business after the surprise departure of Tony Edwards, revealed the firm was setting up a research capability in Shanghai to cover A-shares.
Robeco will also be adding two analysts to its fixed income research in the region next year – probably in Hong Kong – as it moves to expand coverage of Asia’s growing debt markets.
It is also in the process of applying for a licence to set up a wholly foreign-owned enterprise (WFOE) in Shanghai, plans to expand its activities in Taiwan and is taking its first steps towards opening an office in Singapore.
“Asia is very important from a growth perspective, it is very necessary for us to be here,” said chief investment officer Hans Rademaker.
He said Robeco felt the need to act in response to the gradual opening of China’s capital markets, highlighting how there would be no bigger change in global financial markets over the next five to 10 years.
The firm is investing in a new research platform for mainland companies to complement the market access it would gain via having a WFOE in place. It has hired Lu Jie as head of research for China to build and lead a team of up to four analysts. Lu was previously a portfolio manager at Norges Bank Investment Management (NBIM) in Shanghai and has also worked as an M&A banker at Morgan Stanley.
Robeco currently offers a China equity fund, although it has only 6% exposure to A-shares, with the remainder in H-shares, red-chips and American depositary receipts. For A-share access Robeco uses Stock Connect and its $120 million qualified foreign institutional investor (QFII) quota, which it said was fully utilised.
With regard to Asian fixed income, Rademaker said the firm only had global credit strategies managed out of Rotterdam. “We see Asian fixed income increasing rapidly, especially on the corporate bond side. We think it is a very attractive, fast-growing segment of the market.”
Arnout van Rijn, Hong Kong-based head of Asia-Pacific equities and CIO, echoed Rademaker’s views, saying China growth would be the biggest factor in global capital markets over the next few years.
Robeco’s Asia team has grown from six in 2008 to more than 40 in Hong Kong, with 10 covering Asian equities – to be expanded to 14 with the Shanghai research presence.
The firm saw its Asia-sourced assets dwindle to a few hundred million after the 2008 crisis but recover to $8 billion today.
“The opportunity is clearly there and we have been working to establish a track record,” Van Rijn added. “We would like to see that expand to the A-share market and Asian fixed income markets.”
He acknowledged that achieving growth is challenging these days. “Asian investors still need to cope with the fact that Asian growth is no longer an easy 5-10%,” he said. “It is going to be harder and earnings growth is going to be harder to come by. Historically Asia has grown faster than the rest of the world, but those days are over.”
Speaking on his market outlook, Van Rijn said Asian equities had bottomed out, trading at an average 20-30% discount and 1.4 times book value.
He described the August market correction after China’s unexpected move to weaken the renminbi as cathartic, shaking out all the weak hands into the broader Asian equity market. He pointed to unprecedented outflows from Asian equities as a sign that only hard-core investors were left.