Standing out from the crowd
Category: Asia, China
ICBC Credit Suisse delivers consistent above-par investment performance
ICBC Credit Suisse Asset Management was a relative latecomer when it came to entering the Mainland’s asset management industry. Despite this, the firm has surpassed many veterans and first movers in terms of asset under managements as a result of the painstaking efforts it has made to succeed. The company has made its mark by delivering consistent above par investment performance over the years since, mainly due to the calibre of its fixed-income investments.
Established in 2005, the firm’s fixed-income products have long been in the top three in the market by AUM. Specifically, the firm’s ICBC Credit Suisse Money Market Fund and ICBC Credit Suisse Pure Bond Fund topped their peers in 2013 measured by investment returns. Just as importantly, its fixed-income funds with one- to three-year tenors notched up returns that outperformed the industry average by 1.3 to 1.7 times.
The firm’s ICBC Credit Suisse Stable Growth Fund was the second best performer among the 63 mutual funds with AUM of more than 10 billion RMB (US$1.60 billion), and in September 2013 generated a staggering accumulated return of 77%. Moreover, four of the firm’s products broke into the top tier.
Haitao Du, chief investment officer of fixed-income and fund manager of ICBC Credit Suisse, summarises the firm’s fixed-income success as the result of three marked characteristics of its fixed-income team:
Competence in risk management: the ICBC Credit Suisse team has particular strength in risk/return ratio assessment. It pointedly carries out cogent risk projection prior to every investment, taking all potential concerns into account even when the market looks to be plain sailing for investors
The team is adept at understanding clients’ risk tolerances and expected returns. That along with good product positioning enables ICBC Credit Suisse portfolio managers to optimise client investment returns with customised investment prescriptions
Apart from fixed-income investment, ICBC Credit Suisse portfolio managers take a broad view of various asset classes because of increasing correlation in the capital market. Many investors utilise risk/return models in deciding which asset classes they favour. The firm’s managers, therefore, pay very close attention to equity, commodity, and overseas markets to verify that their judgment is in line with market trends
As an example, regarding the Mainland fixed-income market, Mr. Du confides that the bond market is bulking up, having vaulted the 1.11 trillion RMB mark at the end of 2013.
“The onshore bond market is on the cusp of transition, driven by a number of factors such as ongoing RMB internationalisation, interest rate liberalisation, onshore bond defaults, and a growing pool of domestic savings. As such, investors have to be more open-minded in approaching a new era teeming with opportunities and challenges. It is very critical to have appropriate fixed-income products capable of accommodating both issuers’ and investors’ demands,” he says.
Mr. Du sees this year’s market outlook as very challenging now that the global economy is becoming more polarised. Domestically, the tightening of bank financing along with deterioration in the credit risk status quo are likely to weigh heavily on the performance of RMB fixed-income products.
It is against this backdrop that Mr. Du explains that the ICBC Credit Suisse Enhanced Income Bond Securities Investment Fund has restructured its weighting in debenture and convertible bonds, aiming to mitigate downside risk.
In terms of investment strategy, Mr. Du reveals that the fund approach is relatively diversified, the fund portfolio being a blend of various types of credits. “No single asset class can consistently outperform the market under varying economic conditions. So our funds continually diversify their investment spectrum to hedge against market risk.
“For example, we did not wager on local government debt in the past. But these bonds display a certain investment value to us when their yield reaches somewhere between 7.5% and 8%.”
Business and product strategies
Driven by management operations and product innovation reforms, ICBC Credit Suisse’s fund products have been gathering critical mass since their inception, bringing the firm’s total AUM to as much as 230 billion RMB by the end of 2013. Moreover, its mutual fund size exceeds 110 billion RMB.
Looking ahead, ICBC Credit Suisse aims to utilise its comprehensive business platform to make a marked push in the mutual fund, private equity, and segregated account areas, as well as domestic and overseas asset management businesses. Moreover, the firm believes that strengthening its capability in fixed-income is an ongoing process fundamental to maintaining its market-leading position. All in all, the ICBC Credit Suisse goal is to offer its clients a ‘one-stop’ financial service platform able to accommodate all of their investment needs.
ICBC Credit Suisse has also demonstrated its commitment to overseas expansion, in 2011 setting up a wholly-owned overseas affiliate, ICBC Credit Suisse Asset Management (International), in Hong Kong. It is the only PRC asset manager-linked overseas subsidiary with a state-owned banking background in the territory.
With the ongoing reform of international financial regimes and RMB internationalisation, ICBC Credit Suisse (International) has played an important role in developing itself as a prominent offshore RMB asset management platform. It is also diversifying its product mix to better complement the overseas explorations of the commercial and investment banking affiliates in the wider ICBC Group.
From a product perspective, ICBC Credit Suisse has put serious effort into differentiating its RQFII and QDII product mix, including equity, fixed-income and index products, to accommodate a wide range of overseas and domestic client demands through its mutual fund and segregated account platforms.
Meanwhile, ICBC Credit Suisse (International) will leverage its resources and fixed-income capability in developing a variety of RQFII products. The firm is also preparing to launch its first CNY money market and bond fund products.