Allspring Global Investments has launched its Global Equity Enhanced Income strategy in Hong Kong to retail investors as the US-headquartered investment manager sees more demand among clients in Asia for income products, Andy Sowerby (pictured), its head of the international client group, told FSA.
The strategy was already available to professional investors in Hong Kong and now has been registered with Hong Kong’s Securities and Futures Commission for distribution to both professional and retail investors.
The strategy was only launched in 2020 and is already a top quartile fund among its peers, on a one-year and three-year basis, according to FE fundinfo, generating returns of 19.34% and 20.01% respectively.
The decision comes as an increasing number of investment managers place further weight on income strategies, particularly in Asia where the psychological appeal of regular payment streams remains strong among investors, something which Sowerby echoes.
“We see that as a strategy that’s going to get a huge amount of attention going forward. And its performance has been very, very strong since inception. It’s something that we’re seeing more and more Asian client demand for,” he said.
Start-up at scale
Sowerby’s comments come as Allspring has been building out its business in the region rapidly. The firm is relatively new, having been spun out of Wells Fargo Asset Management in November 2021, although it has $570bn in AUM globally, hence Sowerby’s description of the firm as a “start-up at scale”.
Although Wells Fargo Asset Management previously had a presence in the region, all of the Asia-based staff were licenced under the securities business, meaning that when Allspring was spun out, it didn’t inherit any of the staff.
Allspring moved quickly to put that right and obtained its Singapore licence in September 2022 followed by its Hong Kong licence in January 2023 and its Japan licence in February 2023.
It currently has six staff in Singapore, seven in Hong Kong and four in Tokyo (as well as four staff on the West Coast of the US covering Japan).
The boots on the ground are a mixture of investment and distribution, although in Japan, the firm only has distribution staff as the firm does not have a discretionary fund management licence.
Sowerby said that the firm would continue to add to its headcount, although this would be on a piecemeal basis.
“We’ve won a number of new clients across the Apac region and that just leads us to make incremental adjustments to our headcount. At the moment, we’re hiring an additional person into our Hong Kong office just to help support that client growth. So, we’ll continue to invest in line with how the business develops,” he said.
Expansion elsewhere
Sowerby is a lot more circumspect about whether the firm would look to open any further offices. He notes that the firm has a “watching brief” on Korea, Taiwan and mainland China, although he said there are no plans to open offices in any of those countries anytime soon.
In Korea, Allspring already has a strategic partnership with Amundi, through which the US investment manager distributes a range of target date funds into the local market.
“We really like those partnerships because ultimately we think that it’s the best for the client. You have the local distributor and the international asset manager delivering and developing a solution for the market, which is tailored and customised to that market’s needs. We think that’s a great outcome,” said Sowerby.
In Taiwan, Sowerby notes that the requirements around headcount are fairly onerous if the firm wanted to open an office there and notes that a partnership would be attractive if they could find the right firm to team up with.
Mainland China is the obvious market that is absent when looking at Allspring’s footprint in the region, given the number of foreign firms which have expanded there, particularly after regulators scrapped the foreign ownership cap in 2020. But this is not something that Sowerby is tempted by right now.
“We’ve taken the view on China that it has obviously been a difficult market for foreign managers from a distribution perspective to be successful and we have taken the view that for the moment we haven’t found the right way to enter that market,” said Sowerby.
Expansion into wholesale
Sowerby singles out wholesale as an area where the firm is putting more of its focus. The firm has been adding to its Ucits range to try to expand the number of products available to wholesale investors.
He also notes that many of the hires the firm has made have been with a view to improving its wholesale offering, including Linda Luk, who joined at the beginning of last year as head of sales for north Asia.
It is understandable why Allspring would want to target wholesale. Asia continues to mint more millionaires and billionaires at a record pace and even if only a small fraction of that new-found wealth finds itself into official channels offshore, the opportunities are huge.
The concern though is that practically every asset manager at the moment is also looking to increase their footprint with private banks. Things are even more competitive when it comes to dealing with family offices.
Sowerby does not make any bones about the fact that the only way Allspring will be able to increase flows from wholesale investors is by continuing to deliver for its clients, even though he eschews any top-down targets.
“We know as a firm if we don’t deliver on our performance, if we don’t deliver on our proposition, our business won’t grow. We are driven at the heart of our business by investment excellence,” he said.
He cites the fact that out of the firm’s 15 Ucits funds with a one-year track record, eight are top quartile over the past 12 months and another three are above average in their peer group (see table).
| Fund | One-year return | Quartile |
| US All Cap Growth Fund | 29.36% | 1st |
| US Large Cap Growth Fund | 27.38% | 2nd |
| Small Cap Innovation Fund | 11.71% | 4th |
| US Select Equity Fund | 24.22% | 1st |
| Emerging Markets Equity Income Fund | 19.77% | 1st |
| Emerging Markets Equity Fund | 8.84% | 3rd |
| Global Small Cap Equity Fund | 13.46% | 3rd |
| Global Equity Enhanced Income Fund | 26.39% | 1st |
| Climate Transition Global Equity Fund | 31.09% | 1st |
| EUR Short Duration Credit Fund | 5.72% | 1st |
| USD Investment Grade Credit Fund | 4.39% | 2nd |
| EUR Investment Grade Credit Fund | 5.98% | 2nd |
| Climate Transition Global Investment Grade Credit Fund | 6.21% | 1st |
| US Short-Term High Yield Bond Fund | 7.91% | 4th |
| Global Long/Short Equity Fund | 19.92% | 1st |
Fixed-income expertise
This naturally begs the question why Allspring has been able to outperform its peers and whether it is sustainable over a longer timeframe.
Even though it is far from a household name, Allspring is already one of the largest bond investors globally with $423bn in assets under management and its expertise in this area goes a long way to explaining why its funds have outperformed.
Sowerby cites their research-driven approach, where the firm has around 80 analysts covering credit markets globally on a daily basis, which forms the basis of the portfolio managers’ investment decisions, as the reason for their success.
He also notes that due to the fact that typically the firm eschews a top-down approach means that it tends to do even better on a long-term timeframe, citing that 98% of their strategies outperform the benchmark on a five-year basis.
“Sometimes it’s a bit like the tortoise and the hare. We will generate good returns over time, but that means at any one year we are very unlikely to be top of the performance charts because of the very nature of how we manage fixed income,” he said.
“But when you get to three years or five years or seven years or 10, because of what we do it tends to be more predictable, and we tend to be very strong on a performance basis.”
