The Lion-Bank of Singapore Asian Income Fund raised $126m during the three-week initial offer period from 11 January – 2 February 2016, according to a joint statement.
“Investors were attracted by the fund’s diversified portfolio of Asian equities and bonds with a covered equity call option strategy and a target distribution 5-6% p.a.,” according to the statement.
The fund combines Bank of Singapore’s equity discretionary portfolio capabilities and Lion’s fixed income experience.
The statement said the product aims to deliver “regular income” from equity dividends, bond coupons and option premiums, while still being able to capture growth opportunities and manage risks.
Portfolio volatility is mitigated due to the combination of equities and bonds and the flexibility to hold cash, the bank said.
“It pays to wait in these uncertain market conditions,” said Gerard Lee, Lion Global’s CEO.
“For investors seeking some stable sources of income, investing in a balanced, Asian-focused strategy will enable them to participate in potential market upsides, while receiving payouts in the meantime.”
Marc Van de Walle, global head of products at BoS, said the product was conceived in response to investor worry over global market volatility.
“2016 saw global markets get off to the worst start in the last two decades. This has naturally left investors quite shaken and asking what they should do to grow their wealth and yet manage risks in order not to lose the value of their assets.”
“This prompted us to tap on [parent bank] OCBC’s strong wealth platform to generate this investment opportunity in line with our long term investment views.”
The bank said it believes Asian equity markets are attractive due to low valuations, with the MSCI Far East Ex-Japan currently trading at multi-year lows of 11x forward price-to-earnings.
“There are also ample opportunities for income investing, with 29% of Asia Pacific stocks currently offering a dividend yield of 4% or more. Asian bonds proved to be resilient in the market selloff in January and continue to offer higher yields compared to counterparts in the US and Europe.”
The product is offered only to Bank of Singapore clients.
The partnership between the two entities assigns responsibility to the Bank of Singapore for asset allocation decisions, equity portfolio construction and implementing the covered call strategy as part of its discretionary portfolio management service. Lion Global Investors manages the fixed income portfolio.
Bank of Singapore is the dedicated private banking subsidiary of OCBC Bank. It serves high net worth individuals and wealthy families in Southeast Asia, Greater China and the India Sub-Continent.
Lion Global Investors is an asset management firm in the OCBC Group. AUM as of December 31 was $25.8bn.