Amundi courts HK investors with new theme

Asset Class in Focus

An education-themed fund will be a first in the Hong Kong market and the firm also expects to offer it to mainland investors via the MRF scheme.

Amundi AM may follow peers with China WFOE

Amundi has launched the Global Education Opportunities Equity Fund in Hong Kong, which invests in equities of businesses that have exposure in various education-related sectors.

The fund, which is domiciled in Hong Kong, received SFC approval for retail distribution in June. The product is advised by Amundi’s Paris-based wholly-owned subsidiary, CPR Asset Management, which focuses on sustainable investments. CPR AM manages €49bn ($54.51bn) in global assets.

It will be the first SFC-authorised education-focused product in Hong Kong, according to records from the Securities and Futures Commission, and the first in Singapore, FE data shows.

The firm also plans to offer the education fund to mainland investors via the Hong Kong-China Mutual Recognition of Funds (MRF) scheme, according to Zhong Xiaofeng, Amundi’s Hong Kong-based CEO for North Asia.

“The very objective of our Hong Kong-domiciled funds is to, later on, be part of the MRF market,” he said during a recent media briefing in Hong Kong.

Amundi already has two Hong Kong-domiciled products approved for MRF sale in China: the New Generation Asia Pacific Equity Dividend Fund and the Growth Fund, which is a global equity fund. In November last year, the firm submitted an application for a third MRF product, the Disruptive Opportunities Equity Fund, which is still awaiting approval from China’s securities regulator.

“We definitely [have plans] for our Hong Kong-domiciled thematic funds to be offered to the China market,” Zhong added.

In total, the firm has 11 Hong Kong-domiciled funds, six of which are thematic products, according to data from FE Analytics.

Separately, Amundi also announced the launch of the education fund in Singapore (Ucits structure), as well as four other thematic products, which are the CPR Invest Climate Action, Food for Generation, Global Disruptive Opportunities and Global Silver Age funds – all of which are managed by CPR AM.

Other fund managers have also launched several thematic products in Asia this year, which include Janus Henderson, Nikko Asset Management, UOB Asset Management, Allianz Global Investors, Blackrock and Value Partners.

Small universe

The education market is huge, with global education expenditure expected to grow to $10trn by 2030 from $5trn in 2015, according to Guillaume Uettwiller, Paris-based equity portfolio manager for global thematic equities at CPR AM. Uettwiller, who also spoke during the briefing, manages the education fund.

However, Uettwiller acknowledged that the investible universe for listed education-related stocks remains small. Currently, there are only around 160 companies globally.

But he believes that the universe should grow, noting that of the 160 companies, 35 of them just had their IPOs in the last three years. He added that around 75% of the newly-listed companies came from emerging markets.

Uettwiller screens the 160 stocks and will only consider investing in companies that have at least $300m in market capitalisation. The firm then makes use of its proprietary ESG screening process to exclude companies that have low ratings. This leaves Uettwiller 105 stocks to choose from and he will hold only 60-80 positions in the portfolio.

“We chose to make the portfolio diversified because most of the companies in the investible universe are small-to-mid cap companies with specific business risks.

“We also take into consideration the risk of inter-correlation between the names [to prevent concentration in a few end-markets],” he said, adding that the fund invests in three broad segments.

The segments are education facilities, which include childcare centres, universities and colleges; educational services, which provide educational supplies and real estate focused on the sector; and educational content and tools, such as those that are involved in publishing and production of academic content production.

Other thematic fund managers, such as Thematics Asset Management, have said they are aware that the stocks they invest in should be exposed to different parts of the market.

“When managing thematic products, you should at least hold companies that are exposed to different verticals, which also prevents the portfolio from being too cyclical,” Karen Kharmandarian, chairman and chief investment officer at Thematics AM, said recently.

“It is great if [a sexy] end-market becomes a tailwind. But what do you do when you have a headwind in this market? It is impossible to protect your performance.”


CPR AM’s education fund versus its reference index since inception

Source: FE Analytics. In US dollars. Note: CPR AM’s education fund was first launched in Europe in November last year.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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