Standard Life Investments (SLI) this week moved into a new office in Hong Kong’s Central district and announced plans to almost double the team’s headcount in the coming year.
This is a big statement of intent, given that the fund house had been based in Causeway Bay since 2001 – more a shopping district than the typical Hong Kong base for a big international asset manager.
SLI, part of UK insurance firm Standard Life, plans to add 10 to its 15-strong Hong Kong team in the next 12 months across fund management, research, operations, and legal/compliance. Recent senior hires include Allen Wang, head of Asia institutional business, and Virginia Devereux Wong, head of Asia wholesale business.
The firm is keen to boost the amount of assets it sources from Asia Pacific, although it declines to specify what the regional AUM figure is currently. In its list of the top 100 asset managers by Asia-Pacific-sourced AUM as at the end of 2012, SLI ranked 64th with $23.5 billion out of a global total of $247 billion, or 9.5%, according to AsianInvestor estimates.
While SLI prefers not to offer a specific target for investment sourced from this region, it says it has made raising assets in Asia Pacific a priority.
“It’s time that we took the Asian business to the next level,” says Colin Clark, Edinburgh-based executive director of the board and head of global client group at the opening of the new office on Queen’s Road Central.
One areas SLI is closely monitoring is that of the proposed Hong Kong-China mutual recognition agreement (MRA) for funds, on which more details are widely expected by the end of the year.
The firm has made researching the scheme a priority, notes David Peng, head of Asia. He declined to say if SLI will launch Hong Kong-domiciled funds.
“The fundamental question that hasn’t been answered,” he says, “is how do you offer products on both ends especially when Hong Kong is an omnibus arrangement and China is individual shareholders? Some of these operations logistical issues need to be discussed.”
(Hong Kong distributors manage client fund investments via an omnibus account system, so that asset managers are not privy to the identity of the underlying investors. For distributors in China, the account holds individual accounts – which may be coded – that distributors may not be willing to share with fund managers.)
Certainly, many questions remain around the MRA, including whether foreign fund houses’ representative offices in China will have the legal right to provide sales support to mainland distributors.
Meanwhile, SLI aims to market its actively managed account capabilities, including for multi-asset products, to Asian institutional investors.
However, there has been a recent trend for institutional investors to increasingly seek more passive exposure, such as through exchange-traded funds. According to a BlackRock survey released in early October, 74% of Asian insurance companies say they are likely to increase investment in ETFs over the next three years.
SLI is sanguine about this. “There tend to be cyclical swings between passive and active [investing],” Robert McKillop, global head of product and investment specialists, tells AsianInvestor.
“One of the things fuelling the use of passive [investing] and ETFs in particular in institutional markets at the moment is the [ability] to get in and out of specific asset classes very quickly,” he adds. “In a low-growth environment, the ability to access equities through an ETF is very efficient and very cheap.”
Cost will undoubtedly continue to be an important issue for institutional investors. But McKillop argues they should focus more on value and the ability for active funds to deliver consistent alpha. Retail investors are showing strong demand for active mandates, he adds.
And while an increasing number of big institutions are looking to in-source investment capabilities, Clark argues that this still leaves a lot of available opportunities.
“[The situation] only applies to the very, very top tier of institutions and the very, very biggest institutions. On a worldwide scale, this is a very big sliver, but it’s a very small number of clients.” The vast majority of clients still need third party management, he adds.
SLI has offices in Australia, China and Korea, as well as Hong Kong.