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Malaysian wealth firm seeks more offshore assets

Following its partnership with BOCHK AM, KL-based Areca Capital is considering a similar arrangement with Value Partners.

Founded in 2007, the Kuala Lumpur-based asset and wealth management firm manages RM 1.7bn ($410m) exclusively on behalf of its local high net worth clients.

The majority of the assets are in domestic investments in the form of proprietary mutual fund products and private mandates. Now the firm wants to offer more offshore products by partnering with regional and global fund managers, according to CEO Danny Wong.

Last month, for example, Areca Capital partnered with BOCHK Asset Management. Under the partnership, the Malaysian firm chose BOCHK’s All Weather China High Yield Bond Fund as one of the products that the Areca Flexi Fixed Income Fund will invest in.

In Malaysia, in order to invest in an offshore fund, the firm has to meet a series of regulatory requirements and do its own due diligence on the targeted product.

Wong said his firm’s Flexi Fixed Income Fund, which is an Asia-Pacific-focused bond fund, is not a feeder fund. The manager has flexibility to invest in other mutual funds, ETFs and individual securities, which he said is preferable.

“Not only can you invest in different products, but you can also control the amount of cash in the fund. For a feeder fund, you have a minimum amount of assets that should be invested in just one fund,” he said, adding that the firm wants to be seen more an “asset allocator” than just a product provider.

More partners sought

In a recent move, Areca is considering partnering with Hong Kong-based Value Partners, according to Wong. Without giving a timeline, he said that the Flexi Income Fund would invest in the firm’s Greater China High Yield Income Fund. However, currently there is no formal collaborative agreement between the two firms, he added.

The firm is also in discussion with other offshore managers for similar partnerships. The intention is to launch Malaysian-domiciled mixed-asset and fixed income funds that invest offshore — globally but with an Asia-Pacific bias.

The planned products will follow the Flexi Fixed Income Fund model, holding a mandate to invest in other mutual funds and ETFs.

An offshore equity fund is not yet in the pipeline, however, as Malaysian investors have become cautious on the asset class, according to Wong.

“Investors in Malaysia still have uncertainties with equity products and have focused on capital preservation or income, so for now they prefer fixed income and multi-asset products,” Wong said.

Data from Morningstar Direct confirms that Malaysian investors have been losing appetite for equity funds, which had net outflows of $1bn during the first half of this year. Fixed income has become the most popular asset class with net inflows of $6bn, followed by mixed-asset products ($162m).

Regional plans

Areca Capital has aggressive expansion plans and headcount has doubled to 60 in the past year, according to Wong.

The new hires include relationship managers and investment consultants.

“These consultants will be assisting our sales staff in setting up private trusts or estate planning. We also want to expand our services beyond the fund management side,” he said.

The firm’s ambition is to grow in the region as private wealth increases.

“We only have a few investors from neighbouring countries such as Thailand and Singapore, but eventually we want to be a regional player.

“Asia is becoming home to more billionaires, so this is the right time to be more pro-active with wealth management offerings,” Wong said.

Part of the Mark Allen Group.