“There is an ongoing trend of Chinese asset managers launching Ucits or alternative investment funds in Europe and they typically do it through their Hong Kong office,” Silvestro told FSA.
Luxembourg-headquartered Lemanik AM’s core business is to provide third-party management company services to asset managers wanting to set up European domiciled funds.
The firm opened its first Asia office in Hong Kong this month amid rising interest of Chinese managers looking to launch funds in Europe, according to Silvestro, who joined the firm this month. The firm has a small base of Asia clients from Hong Kong, Singapore and Australia.
Incepting a Ucits-compliant fund domiciled in Luxembourg or in Ireland is the best way to access the European market as it covers many countries in the European Union, and a number of Asian managers have done so.
E Fund Management Hong Kong, which is a wholly-owned subsidiary of Guangzhou-based E Fund Management, first expanded in Europe in 2014 with the launch of a Ucits renminbi qualified foreign institutional investor (RQFII) ETF in London, Frankfurt, Amsterdam and Milan, according to the firm’s website. It also launched a Ucits bond fund in the region in 2016.
Hong Kong-based Value Partners has also expanded in Europe. Its latest fund launch in the region was in October last year, when it rolled-out a Dublin-domiciled Ucits global emerging market equity fund. The firm has also been managing the Multi-Asset Income Fund and Classic Equity Fund, which were launched in 2012, according to records from the UK’s Financial Conduct Authority.
Silvestro expects that more Chinese asset managers will be bringing China-focused equity funds to Europe, especially after this month’s MSCI index inclusion of China A-shares.
He also expects more Chinese alternative funds, particularly infrastructure products, to be launched in Europe, which are connected to the One Belt One Road Initiative, he added.
The $4trn market
Silvestro acknowledged that Asian managers will face a lot of competition in Europe.
“The Ucits market in Luxembourg alone is already over $4trn, so it’s already an ultra-competitive market,” he said, adding that the big global players already offer Asia-focused strategies, such as China A-share funds.
However, he said that Asia-based managers can emphasise their depth of understanding domestic and regional markets. “Why wouldn’t you invest in one of these asset managers in China that knows the market inside out?”
Asset managers in Asia planning to expand in Europe usually ramp up their domestic and regional capabilities first. Value Partners, for example, strengthened its Singapore-based investment team and established an office in the UK to extend its coverage of global emerging markets in 2016.
Korea-headquartered Mirae Asset Global Investments, which also distributes funds in Europe, set up in seven countries in Asia over the past 13 years.
Another challenge in Europe often cited by Asian fund managers is distribution.
Jung Ho Rhee, Mirae Asset’s president and CEO, said previously that in Europe alone, it is difficult for a product to be distributed in the UK, even if a fund manager is from France or Germany. Distributors also have high standards for products they add to their shelves and each market would have different investor preferences, he added.
