It is a little over 10 years since the Korea-based asset manager Mirae Asset opened a Hong Kong office and initiated a new strategy: to be a regional, and later global, fund manager based in Asia, offering Asian product to the region and the world.
It might not sound such a visionary position, but there are still few truly regional home-grown Asian asset managers. For a pan-Asian equity fund one is still likely to go to a US or European fund manager rather than one that has grown up in the region.
At the end of February, group assets under management were $57.3 billion, of which roughly half was outside Korea, and of which $8.1 billion was in 144 ETFs.
The Mirae model is interesting in that it doesn’t just distribute internationally, but seeks a Fidelity-style commitment to investment managers on the ground. It has a presence in Korea, Japan, China, Taiwan, India, Vietnam and Australia in its home time zone, plus the UK, Canada, the US, Brazil and (through the Horizons ETFs business Mirae acquired in Canada) Colombia. It claims 122 investment professionals focusing on emerging markets.
The approach is best illustrated by its flagship equity strategy, Great Consumer, sold in Asia, global emerging markets and global forms. The theme – to invest in companies that can capitalize on growing consumption in emerging markets – is the sort that requires bottom-up research rather than just an index-hugging play on big market-cap stocks. The Asia version, for example, looks at gaming, internet, healthcare, rising Asean income, luxury goods, local food tastes and modern retail, and comes up with a portfolio quite different to the usual pan-Asian equity products. The top holding in February was Chinese internet play Tencent, followed by Korea’s Hotel Shilla and the Philippines’ Universal Robina Corp.
|Jung Ho Rhee, Mirae Asset|
The fund, like many, is available in Ucits/Sicav (Undertakings for Collective Investment in Transferable Securities/an open-ended collective investment scheme) form, which allows for its distribution both within Asia and farther afield. Indeed, Mirae is surely the best-placed Asian fund manager to comment on the various moves for an Asian passport scheme. Is one needed, or does Ucits serve the purpose already?
“Ucits is the most acceptable at the moment in Asia, and for Korea is the most identifiable regulatory family,” Rhee says. Of 12 Ucits funds, six now have general authorization by Hong Kong’s SEC, for example, and they are also easily sold in Singapore and southeast Asia, although not yet straightforwardly in China. So where would an Asian passport fit? “A Ucits cannot provide all the various corners of investor appetite, especially for retail. I think plain-vanilla funds strategies can be provided by the Ucits schemes, but very specific investment vehicles tailored to local appetite could be easily transferred to other countries, so a mutual recognition fund passport could provide additional value in addition to the Sicav ones. We complete each other.”
The problem, he says, is the challenge of doing anything regional in Asia. “We don’t have any unified body like an EU,” says Rhee. “In order to have an Asia-based fund passport we need to have unified jurisdiction, which is very difficult. That is why so far we have only seen bilateral things: mutual recognition between Australia and Korea, for example.”
So why have so few others in Asia taken the Mirae approach? “The disparity between the countries in Asia is much bigger than the disparity between the countries in Europe,” he says. “It is hard to develop on-the-ground research capability in various countries. Number two, maybe the potential demand from each of the countries is still limited.” But he believes flows around Asia – inbound, outbound and within – are all increasing, “providing more opportunities to do something in Asian asset management”.
Although Mirae reaches a lot of retail in Korea and Japan – and globally through the ETFs – in most of the world its priority remains institutional, and in this respect its success will rest partly on changing global attitudes towards allocation. “Emerging market allocation in the US is very low. It has huge potential to reallocate,” Rhee says.
Flows have been impeded by the relative outperformance of developed markets in recent years, but to Rhee this just underlines the importance of a considered, concentrated approach. “If you look at the performance of individual names in Asia – in tourism, e-commerce, healthcare, consumer – those names have performed very well versus global names,” he says. “Do not just talk about the general indices. You can capture the growth through specific sectors and names instead.” Apart from sectors, he also highlights the merits of looking on a single-country basis, notably Korean consumer this year.
Now one of the world’s biggest players in ETFs, Mirae is having an influence on that market’s evolution. Korea has long been a willing home for more complicated ETFs, such as inverse, leveraged or synthetic structures, which until recently had been shunned in other regional markets such as Australia and Hong Kong. Some are still resistant – “Hong Kong regulators are fairly conservative about inverse and leverage”, Rhee says – but Mirae’s BetaShares subsidiary in Australia is bringing complex products to that market for the first time.