James Williams. news editor, Hedgeweek

Gottex acquires Penjing, India suffers outflow woes, Asian hedge funds post strong Q1 returns, AXA Investment Managers open Beijing office

AXA Investment Managers announced this week that it had obtained permission to open a representative office in Beijing having received its registration certificate from Beijing Administration of Industry and Commerce.  

Ying Du has been appointed as Chief Representative and will report to Terence Lam, AXA IM head of sales & marketing, Asia. In a move that certainly helps solidify the firm’s presence in the region, the new office will focus on performing market research and building relationships with Chinese institutional investors. AXA IM says it wants to contribute to the rapid development of China’s asset management industry; having a Beijing operation is a good step towards achieving that goal.

Dominique Carrel Billiard, CEO of AXA IM, commented that Beijing representative office was a strong symbol of the firm’s commitment to Asia Pacific, and specifically China, over the long term. “It is also a clear demonstration of our ambition to develop our investment offering, our multi-expert model in high growth markets in line with the global ambition of our parent company, the AXA Group,” said Carrel Billiard. Jean-Pierre Leoni, AXA IM head of Asia Pacific, added: “Our presence in Beijing will facilitate our exposure to sophisticated institutional investors in China.”  

Whilst the positive developments coming out China are encouraging for investment professionals, eager to tap into China’s vast wealth, it’s not been so good for its close neighbour, India. Money is starting to flow out of the sub-continent and into the grateful arms of southeast Asian countries like Indonesia as foreign investors lose patience with the country’s anemic growth. As Reuters reported this week, investors pulled USD540million net out of India in March and April, compared to January and February which attracted inflows of USD13billion.

Gautam Prakash, founder of US hedge fund Monsoon Capital, was quoted as saying: “India was sold on the promise of high growth which simply hasn’t panned out over the past four years.” It seems that two tax provisions put forward in the March budget to tax indirect investments and clamp down on tax evasion were the last straw for many; Macquarie pulled out of short positions in India’s single stock futures in its Asian Alpha fund and is now using a futures contract in Singapore based on exposure to the 50-share NSE index.

Although the provisions haven’t actually materialized, they fact they were mooted was reason enough for investors to act with their feet. Tim Condon, head of research and strategy for Asia at ING even went so far as to suggest that the Indonesia could end up replacing India as the ‘I’ in the BRIC acronym. More worrying still for India is the fact that Mark Mobius’s USD18billion Franklin Templeton Asian Growth fund reduced exposure to India to 16 per cent at the end of March from nearly 20 per cent a year ago. At the same time, exposure to ASEAN countries – which include the likes of Thailand, Malaysia, Indonesia, Philippines and Singapore – has risen from 31 per cent to 35 per cent.

“The ASEAN alternatives do have more positives and less negatives than India and we think that foreign investment outflows from India into the ASEAN alternatives are highly likely to increase if anything,” commented David Baran, co-founder of Symphony Financial Partners.   

Looking at developments in Hong Kong, it was announced this week that Gottex Fund Management Holdings Limited, the independent global alternative asset management group, had reached agreement on the acquisition of Asian FoHFs firm, Penjing Asset Management. Penjing was established by Ronnie Wu, who joins Gottex as a senior executive in Asia. Gottex is to acquire the entire share capital of Penjing which runs USD434million in assets across a variety of Asia-focused products. The acquisition is awaiting regulatory approval.

From an asset raising perspective this will put Gottex in a strong position and should help drive business growth both locally and globally. Wu will become CIO for the combined Asian product line and continue as portfolio manager of the Penjing funds. Ted Wong is to continue managing the Gottex Tiger product and be closely involved in the Asian investment process.

“The combination of Gottex and Penjing establishes one of the largest Asia-focused hedge fund investment firms with the deepest investment team, which will allow our local and global clients to continue to invest in this fast growing region with confidence,” commented Max Gottschalk, CEO of Gottex Asia. Added Wu: “Gottex provides a global institutional asset management platform with strong investment processes that will allow Penjing’s product line to grow and achieve its potential.”  


Finally, despite last year being a car-crash for most Asian fund managers, it seems they’re going some way to eradicating those losses in what has been a strong start to the year. According to Hedge Fund Research its HFRI Emerging Markets: Asia ex-Japan Index gained 7.4 per cent in Q1 2012; the best quarterly start since 2006 when it gained 12.3 per cent. Last year’s volatile markets saw the HFRI Asia Index decline by 18 per cent. In addition, the number of active Asia-focused hedge funds increased to 1,101. That’s pushing close to the record number 1,107 funds recorded in Q4, 2007.


HFR’s research also showed that total capital invested in Asia’s hedge fund industry had risen by over USD4.5billion since end-2011 to USD86.6billion. In a further sign that China is growing in importance, the number of hedge funds headquartered on the mainland stands at 30 per cent, compared to 20 per cent in Q1, 2009, with Singapore the second most-preferred location for Asia-focused funds.


“China will continue to emerge as the capital of the Asian hedge fund industry, representing integral access to specialized local expertise and insight of Asian markets as sophisticated hedge fund strategies evolve to operate in these markets,” stated Kenneth J Heinz, president of HFR. “As this occurs, funds operating in Hong Kong, Shanghai and Singapore will be as relevant and significant to investors as those operating in New York, London and Zurich.”

 

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