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Tencent JV plans second fund in Hong Kong

A number of Chinese firms have launched money market funds in Hong Kong this year as investors lean toward safe assets.

Gao Teng Global Asset Management received a greenlight this month from the Securities and Futures Commission (SFC) to offer the WeInvest Money Market Fund to Hong Kong investors, according to the regulator’s records.

FSA sought more information from GaoTeng, but the firm declined to comment further.

The fund approval comes after the firm started offering its first product in October. The product, the WeFund – GaoTeng Asian Income Fund, invests in Asian US dollar-denominated corporate and government bonds.

At the time of the launch, the distributors of the fund were China Citic Bank and Essence International Securities. Now, the list has been expanded to include ICBC (Asia) and GF Securities in Hong Kong, according to the firm’s website.

Gao Teng is the Hong Kong-based joint venture between internet giant Tencent and Beijing-based Hillhouse Capital Group, which has $20bn in AUM and specialises in alternative assets such as hedge funds and private equity investments.

SFC records show that the joint venture has had an asset management licence (Type 9) since 2015 and received an advising on securities (Type 4) licence in June last year.

Money market funds

Gao Teng’s newly-approved fund is the third money market product that the SFC has approved in the last three months.

In December, E Fund Management in Hong Kong launched the E Fund (HK) Hong Kong Dollar Money Market Fund, according to the regulator’s records. In January, Da Cheng International Asset Management launched the Da Cheng Money Market Fund.

Also last month, CSOP Asset Management listed Hong Kong’s first US dollar money market ETF.

The launch of the money market funds come at a time where private banks are increasing allocations to safe haven investments, which include cash and government bonds.

Pictet Wealth Management, for example, is overweight cash, which represents around 5% in a balanced portfolio.

“Cash is rewarding right now. The risk-free rate gives you 2.6-2.7%, plus it is in US dollar terms. So it’s a fair return considering the macro is not clear,” said David Gaud, Singapore-based chief investment officer for Asia at Pictet Wealth.

Other wealth managers have also turned to cash. In the last quarter of 2018, there was a clear consensus among Asia fund selectors to seek safe havens, such as cash, in the next 12 months, according to the latest asset class survey by Last Word Research.

Three-year volatility and performance of HKD money market funds

Negative periods Positive periods Return Volatility
BOCHK HKD Money Market 2 152 0.95%   0.09
PineBridge Hong Kong Dollar Money Market 0 37 0.89%   0.08
Allianz Choice HK Dollar Liquidity 0 156 0.76%   0.07
Schroder Hong Kong Money Market 3 135 0.57%   0.69
JPMorgan Money Hong Kong Dollar 0 122 0.52%   0.07
Hang Seng Index 65 91 17.37%   16.39
Source: FE. In Hong Kong dollars. SFC-registered funds. Data for the trailing three years, to Feb 21 2019.

Part of the Mark Allen Group.