With a functioning joint venture in China, the next frontier for new business is South Korea, says Desmond Ng, head of Asian institutional business at JF Asset Management. The firm is weighing the pros and cons of setting up a wholly owned investment trust management company (ITMC), or entering a joint venture. Ng hopes to have an active onshore presence established in 2006.
"We see Korean institutional and retail investors are becoming more receptive to products other than domestic money market and bond funds," Ng says. "And the government is pursuing the goal of making Korea an investment funds hub, so it is deregulating and helping improve transparency."
In addition, with a new corporate pensions law passed in December and waiting to be implemented, JF thinks there may be a way to leverage its regional expertise in retirement schemes.
As reported in the April/May edition of AsianInvestor magazine, retail investors have flocked toward international equities exposures, often via funds of funds, and increasingly making regular monthly allocations rather than lump sum bets. Fund of funds assets have grown from practically zero to W4 trillion, while regular savings plans now account for W1.3 trillion of business, up from W300 billion a year ago.
Many international money management companies have taken advantage of recent liberalization allowing for funds of funds. This has proven to be an easy way for Koreans to access a diverse range of international investments, Ng says.
Although the idea of wholly owning an investment management license is appealing, JF has also participated in JVs around the region. In Hong Kong it has partnered with AIA as a master trust for MPF business, and in China it has a JV with the investment arm of the city of Shanghai, Shanghai International Trust and Investment Corporation (Sitico).
The Chinese JV now has an equity and money market fund available.
Another major initiative for JF this year is promoting absolute-return and other non-traditional products to Hong Kong institutions. The Hong Kong market is fairly static, with few big mandates on the block, but most assets remain in the traditional space, such as global balanced and Asian equity funds. JF thinks that, along with its parent JPMorgan, it has a product range that can give Hong Kong clients more diversity.
Although more Hong Kong institutions are looking at alternative investments, Ng says they tend to be sceptical about how to protect their downside risk in a mandate that doesn't follow a benchmark. "We need to do a lot of work in investor education," he says. Hong Kong institutions seem most interested in multi-strategy hedge funds, which can diversify risk, and JF is developing products to meet this perceived demand.
The firm sources around $11 billion from clients in Asia ex-Japan and manages over $30 billion in Asia ex-Japan investments.
