The main contributor to the revenue were the gross performance fees, which skyrocketed 23,704.6% to HK$2.57bn from HK$10.8m, according to the firm’s filing to the exchange.
Performance fees are generated when funds’ returns exceed those of their benchmarks or high watermarks.
While the booming market provided a boost to the funds managed by Value Partners, several of them outperformed their benchmarks.
The Value Partners Classic Fund, with AUM of $1.57bn, returned 44.9% in 2017, compared to 40.1% delivered by its benchmark, the Hang Seng Index. The Value Partners Chinese Mainland Focus Fund delivered 61.19%, surpassing the 54.33% return of its benchmark, the MSCI China Index. The firm’s asset-weighted average return was 29.9%.
“Since 2017 was the best year in the past eight years for Asia-Pacific markets, this outperformance of the outperforming market was no mean feat,” Cheah Cheng Hye, the firm’s chairman and co-chief investment officer said in a statement.
Looking towards 2018, the firm will be cautious, as it expects “very volatile markets”, according to Cheah. “In many parts of the world, stocks do look expensive, and investors seem too complacent, at a time when interest rates are trending up,” he said. “Investing mainly in the Asia-Pacific region, however, we would expect any setback to be temporary, as the region’s economic fundamentals remain robust, with new sources of growth available for use,” he added.
Expanding in China
Cheah believes that China’s financial market has a significant potential to grow further, driven by demand for investments stemming from the high level of individual savings. To capture this opportunity, the firm aims to become an investment solutions provider to Chinese investors.
In January, Value Partners launched an onshore China fund targeting China’s professional investors. The Value Partners PFM Neo-China A Share Fund 1, which primarily invests in China’s onshore equity, was rolled out through its investment-management wholly foreign-owned enterprise in Shanghai.
The firm plans to expand its China business to private equity, through its new subsidiary in Shenzhen. The subsidiary has obtained a Qualified Foreign Limited Partnership license, which enables it to raise funds offshore and onshore to invest in domestic private equity projects.
The asset manager also filed an application for Value Partners Classic Fund to be available for sale to onshore retail investors via the Mainland-Hong Kong Mutual Recognition of Funds (MRF) program.
Outside China, the firm has signed global distribution agreements with some European platforms for its product suite and revamped its range of UCITS funds to attract a broader base of European investors. Apart from its office in London, the firm is planning an expansion to the North American market.
As of the end of December last year, Value Partners’ AUM reached $16.6bn, up 25% from $13.2bn in 2016. The growth was driven by the product performance, according to the firm, with the aggregate returns of $4.03bn.
Returns of Value Partners funds in 2017
Value China A-Share ETF CNY
|Value Partners China A Share Select A Unhedged NZD|
Value Partners China Convergence A
|Value Partners China Greenchip A|
Value Partners Chinese Mainland Focus
|Value Partners Classic B|
Value Partners Greater China High Yield Income P MDisUSD
|Value Partners High Dividend Stocks A1 USD|
Value Partners Multi-Asset A USD
|Value Partners Taiwan|
Sam Value China ETF
|SAM Value Japan|
SAM Value Korea ETF
|SAM Value Taiwan|