Jessica Jones, Goldman Sachs Asset Management
Goldman Sachs Asset Management (GSAM) is one of the largest global asset management firms that has not yet established a joint venture fund management firm or a wholly foreign-owned enterprise (WFOE) on the mainland. Other key players that have not set up onshore fund structures include SSGA, Capital Group and T Rowe Price.
However, GSAM has been doing business in China via sub-advisory relationships, according to Nick Phillips, London-based head of international retail client business.
Nick Phillips, Goldman Sachs Asset Management
“There are a number of countries, [including China and South Korea], where we don’t have mutual funds registered for sale but we do sub-advisory mandates [for an asset manager, bank or institutional manager],” he said at a recent media briefing in Hong Kong.
Globally, the firm manages $75bn in outsourced mandates, he added.
Jessica Jones, Hong Kong-based head of retail client business for Asia-Pacific ex-Japan, said a WFOE structure on the mainland is under consideration.
“China is a very important market for us. In terms of WFOE and how we go about new ways to enter the market, that is something that we are constantly evaluating,” she said.
Retail market entry
GSAM will be also offering mutual funds to retail investors for the first time in Hong Kong after having received approval from the Securities and Futures Commission to roll-out seven Sicav funds in the SAR, according to Jones.
In Hong Kong, the firm has previously only sold to institutional investors and private banks.
The seven retail funds include three quant funds focused on emerging markets, Europe and global core equity portfolios. The others are three emerging market bond funds and a global high yield fund.
The quantitative funds incorporate big data and machine learning into the investment processes, Jones said.
The firm’s quant funds look 150 different factors to calculate the expected returns for the 13,000 stocks in the investment universe.
The various factors include fundamentals and investor sentiment, according to Alison Lau, Hong Kong-based head of Asia ex-Japan for quantitative investment strategies.
Alison Lau, Goldman Sachs Asset Management
Part of the investment process is also taking “unstructured data”, which is data that could not be processed by a simple spreadsheet. Examples are videos, voice recordings, web traffic and satellite images, Lau said.
She explained that unstructured data could give some indicator of a company’s performance before quarterly earnings are announced.
“Historically, you may wait for numbers or metrics that are released by the company [in the earnings reports]. However, now you could actually get web traffic information, and an increase in web traffic activity as an example could be a good leading indicator of a future surprise to the upside.
“The idea is there is a lot of digital data out there that may be able to give you an earlier sense of a company’s earnings and it’s important to be able to incorporate that information in your analysis,” she said.
In terms of retail distribution, the firm is planning to partner with only a few distributors, according to Phillips.
“We think it is important to deal with only two or three distributors. Our primary focus is to give exceptionally strong service to those distributors,” he said.
Phillips said the firm will be working its established private banking relationships in Hong Kong. He referred to Swiss and European banks, but did not name them.
In Singapore, the firm has been selling funds to retail investors since 2016. In total, GSAM distributes 18 retail funds in Singapore and has partnered with HSBC, Standard Chartered Bank, DBS and Citibank for distirbution, according to Jones.