Value Partners Group and Ping An Insurance have formed a joint-venture to launch exchange-traded funds (ETF) in Hong Kong. The deal involves Ping An acquiring a 50% stake in one of Value Partners Group's subsidiaries, Sensible Asset Management Hong Kong (SAMHK), at around HK$23.25 million ($2.9 million).
This deal deepens the relationship of the fund house and insurance company as Ping An owns 9% of Value Partners Group. SAMHK was formed in 2008 to study the ETF market and business, with the view to developing and offering ETFs to retail and institutional investors.
SAMHK is planning to launch its first ETF "soon", subject to the approval of Hong Kong's Securities & Futures Commission (SFC) of the change in shareholding, final fund registration and authorisation as well as market conditions. Value Partners declined to provide specific details of the planned ETF launch, citing regulatory constraints.
SAMHK's first ETF is expected to track the FTSE Value-Stocks China, which was designed by Value Partners using its proprietary value screening process and was launched in cooperation with FTSE last month. The index captures the performance of 25 quality value stocks among liquid and tradable Chinese companies listed on the Hong Kong Stock Exchange including H-shares, red-chips and P-chips.
That new China equity index adopts Value Partners' value-based methodology and is calculated and maintained by FTSE as a custom index solution.
Value Partners Group has a reputation for being a pioneer in value investing, particularly in mainland Chinese companies. This year, however, the fund house is branching out and expanding its product offering to include ETFs and bond funds. The move is in line with Value Partners' efforts to keep up with the demand of its clients, introduce innovative products, and reach its target assets under management (AUM) size of $10 billion. As of April, Value Partners had an AUM of $2.9 billion.
In a previous interview with AsianInvestor, Cheah Cheng Hye, Value Partners Group's chairman and CIO, said Value Partners is planning to build a niche in the ETF market. The fund house now has the quantitative Asia Value Formula Fund, which has served to improve its learning curve when it comes to ETFs. The plan is to focus on enhanced ETFs that are aimed at trying to improve performance by combining index tracking with proprietary investment strategies.
Louis Cheung, executive director and group president of Ping An, says the insurance firm is keen on the collaboration with Value Partners because it sees the rapidly growing customer demand -- which is also reflected in qualified domestic institutional investors (QDII) fund flows -- for investment products that offer strong liquidity and a high degree of transparency at a low cost. These three qualities are among the selling points of ETFs.
SAMHK is one of five investment management businesses of Value Partners Group. Value Partners Limited, because of the flagship fund, contributes the most to the group's bottom line. But Cheah says SAMHK may be a serious market player three years from now because the market is changing and this business is expected to cater to these changing market needs.
When asked in a previous interview how SAMHK will likely evolve, Cheah noted that Value Partners Group hopes to come up with more products that appeal to investors in mainland China. Don't forget that 9% of this company is owned by one of China's biggest insurance companies and this gives it the ability to co-brand product offerings.
"The dynamics of asset management is changing," says Cheah. "The source of funding now is moving away from US and Europe to Asia-Pacific including Hong Kong, China and Singapore and so our fundraising and product offering and menu will all have to be adjusted to fit the changing consumer demand."
Value Partners isn't expected to hire new people for the joint venture. Value Partners Group works as a cohesive team of around 20 investment professionals and around 60 support staff, all of whom are involved in the group's investment management businesses.