Standard Life Investments (SLI) is set to introduce a multi-asset growth strategy for institutions in Asia and is considering launching a balanced fund focused on the region, AsianInvestor has learned.
The UK-based firm, which manages $373 billion globally, of which Asia Pacific accounted for $15.2 billion (4%) as at end-2015, has been striving to build its presence in the region, including through tie-ups with peer-to-peer lending platforms.
SLI already runs $76.5 billion in multi-asset products, $73.3 billion of which is invested in its Global Absolute Return Strategies (Gars) offering. Hence multi-asset accounts for just over a fifth of its total AUM.
On a recent visit to Asia, Malcolm Jones, investment director for absolute-return and multi-asset investing, revealed SLI was planning to launch a new multi-asset growth fund in a Sicav structure and make it available for institutions in Europe and Asia in the second quarter.
“What we are trying to do with this strategy is different from Gars,” said Edinburgh-based Jones. “One of the frustrations that clients have mentioned [with Gars] is your upside is capped. Even though it may have done quite well, equity investors have done better.”
As such, the new product will be a total-return strategy, aiming to provide upside from global growth markets while offering downside protection. It will comprise traditional investments – including long equities, credit and listed real estate – while building in enhanced diversification strategies.
“Each of these investments will add value but behave differently to growth markets,” said Jones. “This is about taking long-term risk. We believe it will get traction with asset owners.”
He will be hoping for more fortunate timing of the product launch than Baring Asset Management experienced with the May rollout of its Hong Kong-domiciled multi-asset income strategy, just before Chinese stocks started to plummet on June 8. Barings has admitted that fundraising has been challenging as a result.
Meanwhile, Jones added that SLI was mulling whether to launch an Asia-focused balanced fund for retail investors.
Asked if there would be any overlap between the two multi-asset strategies, Jones said the former was designed for sophisticated investors and would take currency positions using derivatives, while the latter would be “a traditional bread-and-butter retail fund product”.
He noted SLI was intent on building out its Asia-Pacific presence, having boosted headcount to around 50 in the region, from 10 three years ago. He said it was seeking to boost resources further globally, including investment and research analysts, having hired an emerging-market debt team in London four years ago.
The firm manages mainly institutional and high-net-worth money in Hong Kong, Singapore and Australia, and works on a distribution partnership basis in Taiwan and Thailand. It also has representative offices in Korea and China.
Jones admitted he had been surprised by Beijing’s move to revalue the RMB last August and also to introduce a stock circuit-breaker at the start of this year. He added that efforts by Chinese authorities to limit local investors from moving money offshore “makes it harder for us when we are trying to do longer-term planning”.
To date SLI’s Gars product has been overweight developed markets over emerging ones, although Jones points out the former had started underperforming this year.
Nevertheless, he said Gars was not raising its EM exposure at this point. Its risk-on strategies include European equities, Japanese equities, short US duration and betting on the Indian rupee versus the Swiss franc.
Asked his views on the biggest threat to global growth, Jones simply pointed to continued market decline. “Credit markets are still liquid,” he said. “If we see that start to disappear, that would be our biggest concern.”
The market environment in the past couple of years has certainly been challenging for Gars, as for investors in general.
In the second half of 2013 the strategy moved into global oil majors. "Our thoughts at the time were that they have fortress-like balance sheets, get a nice dividend and it is a cheap sector,” Jones noted. Gars exited the position at the end of 2014, having made money despite the oil price fall, as it was worried over dividend sustainability and felt the sector was fully valued.
Meanwhile, the strategy had taken a position in global mining stocks in 2014, with the view that the sector was undervalued and that corporate restructuring would realise this value as global growth accelerated. Gars exited the position in September last year, said Jones, but "it has been painful because growth went the other way, and mining companies have not restructured as fast as we would have hoped".