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EFG AM, Templeton launch funds in HK

EFG Asset Management launches an Asia-focused digital fund, while Franklin Templeton joins the smart beta bandwagon.

EFG AM launched this month its New Capital Digital Economy Fund, according to records from the Securities and Futures Commission.

The fund invests primarily in Asia (ex-Japan) equities that focus on digital technologies, according to the firm’s website.

The sectors favoured by the fund include IT infrastructure, social media, fintech, virtual reality, artificial intelligence, wearables, robotics and cyber-security.

The firm joins other fund managers that have launched IT-related funds in Hong Kong. According to FE data, that are 21 funds in the IT sector.

However, the majority are global funds. There are only two SFC-registered IT funds that invest in the region: the JP Morgan Pacific Technology fund, which invests in Asia-Pacific, and the CSOP SZSE ChiNext ETF, which is China-focused.

Technology stocks have seen stellar performance this year. Year-to-date, the MSCI All Country World Information Technology Index returned 45.8%, versus the broader MSCI ACWI Index’s 22.05%.

Templeton’s smart beta

Separately, Franklin Templeton Investments has launched a Hong Kong equity smart beta strategy under the Mandatory Provident Fund (MPF) scheme, targeting MPF providers in Hong Kong, according to a statement from the firm. The fund is the first of its kind under the MPF, it said.

The fund is not just available for MPF providers but also institutional and professional investors in Hong Kong, according a firm spokeswoman.

It aims to achieve a lower level of risk and higher risk-adjusted returns relative to the FTSE MPF HK Index, according to the statement. It uses a quantitative, proprietary and rules-based index methodology and selects stocks that have exposure in four investment factors: quality (40%), value (40%), momentum (10%) and low volatility (10%).

“Our smart beta offering tilts toward quality and value, which are the most important contributors to long-term stock performance,” said David Chang, CEO and regional head for Greater China, in the statement.

“Instead of trying to move in and out of individual factor-based investments in anticipation of market changes, we believe that staying invested via a multi-factor smart beta fund is a better option over the long-term.”

Smart-beta funds are slowly becoming popular in Asia and may provide investors with more sophisticated exposure while providing portfolio diversication, Joel Coverdale, Hong Kong-based managing director for Asia-Pacific at risk management firm Axioma, said previously.

However, he has concerns about how the products are built. If smart beta focuses on a particular factor, some of the assets in the portfolio may have characteristics that are driving returns that the manager is not looking at.

“You might choose the top 20 low volatility stocks [and the majority of them] might be banks, because banks may happen to be low volatility at the moment,” he said. “Am I taking on a bank risk or a low volatility risk, and if they are Chinese banks, am I taking a country risk?”


Part of the Mark Allen Group.