In Hong Kong last year, about 40 funds were either liquidated or announcements were made that they will be deauthorised or liquidated, meaning they are either no longer authorised for public distribution or liquidated as a whole.
Among them, five were merged into other funds.
In Singapore, the number of fund closures is about 25. Six of them were merged, according to Morningstar data compiled by FSA.
Retail market exit
Two firms – Lyxor Asset Management and Calamos Investments – withdrew from retail fund distribution as a whole in the SAR, but remain in the Singapore retail market.
Lyxor, the asset management arm under French bank Societe Generale, deauthorised all of its six mutual funds in the Hong Kong market starting 2016.
They are: the Lyxor Agriculture Fund; the China A Fund; the Dynamic Alternative Energy Fund; the Dynamic Water Fund; the Epsilon Managed Futures Fund and the Selection China A Fund.
The Agriculture Fund and Dynamic Alternative Energy Fund were both terminated in July last year due to small fund size – $4.8m and $2.5m, respectively, (as of May 2016), according to the firm’s notice to the unitholders of the fund.
The Dynamic Water Fund “has not been marketed to the public in Hong Kong and has not accepted subscription for units from new Hong Kong investors regardless of the distribution or subscription channels used” since June 2011, the notice stated.
“The recent deauthorisation only concerns a few funds out of Lyxor’s entire offering. This process is part of the normal lifecycle of an asset management firm, as we review our product range on a regular basis to ensure we provide suitable solutions for our investors,” a spokesman said.
He noted Lyxor focuses on offering alternative investment solutions to both institutions and fund distributors in Asia, including Hong Kong, Singapore, South Korea and Japan.
Lyxor exited the Hong Kong ETF market back in 2014 by closing 12 products. It was also said to consider selling a minority stake in Fortune SG Fund Management, a Chinese mutual fund joint venture.
Chicago-based Calamos Investments deauthorised three funds in Hong Kong in January, according to the Securities and Futures Commission.
They are: the Calamos Global Convertible Opportunities Fund; the Global Equity Fund; the US Growth Fund.
The firm did not respond to email request for comments. But according to FE, it still has three mutual funds selling in the Singapore market.
Axa IM also had three funds deauthorised in the SAR at the end of last year. They are: the AXA Rosenberg Japan Equity Alpha Fund; the Pacific Ex-Japan Equity Alpha Fund; the Pan-European Equity Alpha Fund.
But they are still available in the Singapore retail market. A spokeswoman declined to comment.
Liquidated funds
Among the products that were liquidated as a whole, three of them are single country equity funds (Singapore, Korea and Taiwan) from HSBC GAM.
All three funds attributed the closure to a small fund size below the $50m floor set in their prospectus. That made it “no longer sufficient to permit efficient management” and “also unlikely to grow in a way that would make it viable over the long term,” according to the firm’s notice.
Other examples of closure in 2016 include the Baring Asian Debt Fund and the JPMorgan Funds Asia Local Currency Debt Fund, again due to less than ideal assets under management.
Reasons for liquidation
Luke Ng, senior VP of research at FE Advisory, said the liquidation or deauthorisation of funds do not concentrate on certain fund types or asset classes.
“[Liquidation] is typically more about the product strategy of different fund houses rather than other factors such as the popularity of a single asset class.”
For instance, some single country equity funds are still popular among investors. But because the competitive field using that particular country strategy is small, it may be dominated by a few fund managers and therefore hard to crack, he said.
Some funds might also turn their focus to professional investors – high net worth clients or institutional investors. This investor base can buy into funds that are do not require authorisation by the SFC, he added.
Even as some funds have a relative small size, it does not necessarily mean they will be liquidated or closed down, Ng noted.
For example, the Janus US Fund, recently deauthorised in Hong Kong, had only about $1.9m of AUM as of January, according to the fund factsheet.
But the fund will continue to run, he said. “It might be that the fund is a version of the US fund which has low costs anyway, or that it acts as a building block for other products, or as a component as the full product line-up,” he said.
