We are also looking into the business opportunities in distributing offshore SICAV funds into the US wholesale market. For us, the US is a place where immense business opportunities are yet to be explored.
Meanwhile, we are enhancing our institutional infrastructure and building our global institutional presence.
How are regulatory changes in Asia currently affecting the way you do business there?
Regulatory scrutiny is becoming more stringent. In my opinion, the tightening regulatory changes in Asia and worldwide may create short-term nuisance to business development for asset managers.
However, regulatory scrutiny ultimately benefits investors and also encourages asset managers to embrace best practice within our day-to-day operations.
Recent regulatory changes in Asia include [the launch of] Shanghai-Hong Kong Stock Connect and the mutual recognition of funds between mainland China and Hong Kong. I see these measures as ways of boosting capital flows across countries and regions and, in a way, they encourage international investors to invest in Asia.
Our firm’s SICAV funds have gained permission to trade on the Stock Connect platform from Luxembourg’s regulator, the Commission de Surveillance du Secteur Financier. By and large, I think our firm has benefited from the recent regulatory changes in Asia and we will continue to drive best practice in our business development and daily operations.
Name a key challenge you face in doing business in Asia?
As lower-priced index products, such as exchange-traded funds, are gaining traction in Asia, they present a challenge to active managers. As such, long-only active managers, such as Mirae Asset, need to be able to extract alpha from markets that correlate closely with each other.
In a way, it creates a dilemma as to how to differentiate the product set while also trying to keep ourselves nimble and benchmark agnostic. To overcome this challenge and maximise alpha we are creating high conviction portfolios.
We believe 30 stocks are enough to be reasonably diversified away from non-systematic risk, while accounting for liquidity and market constraints. Over-diversification can inhibit specialists from focusing on their core competencies.
Our portfolio managers are also able to invest in non-benchmark stocks, too. This frees them from performance eroding constraints and they are able to manage portfolios based on conviction and skill.
How are passporting agreements between countries affecting the way you do business?
Although there is vigorous discussion about various passporting agreements, the asset management industry in Asia generally agrees that these agreements will not replace Luxembourg domiciled SICAVs and UCITs.
It is important to note that SICAVs and UCITs are widely distributed into Europe, some parts of Asia (including Hong Kong, Singapore and Taiwan) and even the US offshore market. It is difficult for a new passporting scheme to surpass the reach of the existing SICAVs and UCITs.
It will also take time for different jurisdictions to agree on a set of legal and taxation arrangements for any passporting system. Hence, we are not in a hurry to participate. For us, instead of injecting resources into new funds under any passporting scheme, it makes more sense to continue to focus on our distribution of SICAV funds in Europe, Asia and US offshore market.
Which funds are proving the most popular at the moment?
Our Asia Great Consumer Equity and Asia Sector Leader Equity are the most popular funds within our product offerings.
Both funds capture the investment opportunities brought about by the change in consumption patterns across different countries in Asia. These two funds are investing in Asian homegrown brands that successfully tap into the burgeoning middle-class consumption in Asia.
