Ping An leverages on existing expertise to prosper in Hong Kong
Ping An Asset Management (Hong Kong) (PAAMC HK) aims to be the top Mainland fixed-income asset manager in Hong Kong. The company has enjoyed significant AUM growth in recent years, due in no small part to establishing its external asset management business.
PAAMC HK was established in Hong Kong in 2006, the main impetus at the time being the management of QDII monies for its parent group Ping An, a leading insurer on the Mainland. Up to the end of December last year, the total AUM topped HK$30 billion (US$3.8 billion).
It started its third party asset management business in 2010 in response to the growing market demand for asset allocation in China.
The third party business includes ETFs, unit trusts, and institutional mandates – showed noteworthy progress in which the company posted a staggering growth rate of 384% in total AUM between 2010 and 2012.
Benjamin Rudd, PAAMC HK’s executive director and head of overseas investment, tells Asia Asset Management that the company’s investment results had been recognised internally since its inception: “The track record we built on the internal side helped the set-up of our external asset management businesses several years ago.”
With the external division up and running smoothly, PAAMC HK capitalised on the prevailing trend of an increasing number of mainland investors raising their overseas exposure, as well as the burgeoning interest in China by foreign investors.
“We position ourselves as an investment expert in the Greater China Region,” he explains. “But more importantly, we have a very experienced and stable investment team, which is absolutely essential within the asset management industry. And our team has shown it is capable of generating sustainable profitability for both our internal and external mandates.”
As the investment arm of the mainland insurance giant, PAAMC HK has a real competitive edge in fixed-income investment given that a significant proportion of insurance funds in China must be placed in fixed-income assets.
As such, in 2003 Ping An Group directed its credit rating team to provide independent credit research and analysis to its investment team. This group rates local bond issuers in China which are not covered by the international credit rating agencies. It also analyses US dollar and CNH denominated offshore credits.
Another advantage differentiating PAAMC HK from its rivals is the international background of its investment team plus its longer history in Hong Kong. In general, the other subsidiaries of Mainland asset managers have only established offices in the territory over the last five years or less.
Product-wise, PAAMC HK has developed a comprehensive line-up, which includes four ETFs and one RMB bond fund.
Mr. Rudd expects fixed-income business will remain the company’s key growth engine going forward, noting that foreign investors are heavily under-invested in the mainland fixed-income market: “Many investors are not very well educated and they find it difficult to make appropriate investment decisions because of the lack of cogent information. In this sense, PAAMC HK offers our clients an expedient and road-tested way to capture opportunities in the Mainland fixed- income space. They also stand to benefit by the build-up of our capability in onshore and offshore credits.”
The company anticipates launching offshore fixed-income products that will enable its resources to be fully utilised. As well, it is considering marketing its first RQFII product (an investment grade fixed-income fund), following the firm’s being awarded a one billion RMB RQFII quota from the State Administration of Foreign Exchange (SAFE) on August 28 of this year.
“We will leverage our internal skill-sets and credit rating analysis to develop this fixed- income product line. We believe our expertise will give investors the confidence to access the real investment grade portfolio,” he adds. “Many RQFII players have launched ETFs recently. We prefer to focus on fixed-income because that is where we feel we have a unique advantage.”
With the opening up of the RQFII scheme to Hong Kong-based institutions, Mr. Rudd plays down the impact of the arrival of newcomers: “Simply, the more it opens up, the more opportunities there will be for fund managers to offer products to clients.”
However, Mr. Rudd points out that economies of scale are the major concern for RQFII entities: “It is difficult for asset managers with less than US$1 billion in AUM to stay profitable. The market is so competitive that players require scale to keep them afloat. Retention of talent is another key challenge Mainland asset managers face.”