GAM turns sights on Southeast Asia

Asset Class in Focus

Emerging from a whistleblower scandal, the firm intends to focus on alternative strategies in Southeast Asia such as private lending.

In mid-July, Gam Investments wrapped up the liquidation of the absolute return bond fund range in Asia-Pacific, the result of a whistleblower scandal involving a former fixed income investment director.

“We met the indicated frame-time [for liquidation] except with the last payment, but the results were positive,” said Rossen Djounov, the firm’s Asia head.

Gam is now setting sights on Southeast Asia for AUM growth. Djounov declined to give an AUM target for the region but pledged to grow assets “considerably” and cited Thailand as a key market.

Currently two of the firm’s fixed income products, the Star Credit Opportunities and Catastrophe Bonds, are distributed through feeder fund arrangements with local Thai asset management firms, which are typically units of Thai banks. He declined to name any specific firms.

He added that Gam’s specialist equity funds, such as Star China, Health Innovation and Star Technology are also sold in Thailand but have gathered fewer assets than the fixed income products.

“The overwhelming majority of the business [in Thailand] is fixed income-oriented,” something that he doesn’t see changing in the foreseeable future.

Alternative fixed income

“The next strategy is with private lending, [such as] trade finance vehicles”, he told FSA. “It will potentially come to fruition next year and will be the strategy for 2020,” he said.

Thai distributors – chiefly banks – decide on whether they believe client demand exists for private debt products, then they check with the regulator for approval. Typically, the process takes a couple of months, according to Djounov.

He believes there will be an appetite for his firm’s private lending strategies, which for example provide loans for trade receiveables.

“If you want to have a diversified fixed income strategy, you either go into credit and high yield, or you need to go into other forms of fixed income.”

Gam also has hopes for Malaysia distribution. “We are already speaking to a number of local asset management houses. The focus will be the same as in Thailand, except some of the bigger Malaysia banks already have affiliates or branch offices in Singapore or Thailand.”

“Malaysia is opening up and the regulatory regime is flexible, similar to Thailand,” he said.

Partnerships in the Philippines are also possible, he added. The firm is talking to larger asset management firms that are affiliated to big banks who could help with the distribution. “We are speaking with one or two [undisclosed] names, but it is not something imminent,” he said.

“The uptake of foreign funds in the Philippines has been slow due to high domestic interest rates  — 4.75% earlier in the year and now at 4.25% — and relatively decent returns from domestic fixed income securities, both government and corporate.

“In essence, foreign-generated returns hedged back into the Philippine peso have been uncompetitive versus returns on domestic assets,” Djounov said.

Gam hasn’t looked at anything in Indonesia because he considers it a “highly restrictive” market.

“I get the feeling that they have good business booked in Singapore from Indonesian clients rather than doing anything in Indonesia itself,” he said.

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