Fund managers confident despite market downturn
Cathay Conning says the investment environment is ripe to target investors searching for better solutions
Weak global market sentiment may be discouraging investors from putting their money to work but it hasn't prevented new fund houses setting up shop in the city.
Cathay Conning Asset Management (CCAM), jointly owned by Conning of the US and Taiwan-based insurer Cathay Financial Holdings, is among those who have not let the current economic and investment uncertainties disrupt their expansion plans. The firm will start operating in September, having secured the necessary Securities and Futures Commission licences in February.
"Trying to predict the exact timing when it is best to set up a new business is tough," said Mark Konyn, chief executive of CCAM.
"There are a number of structural advantages to setting up shop now, including a shift in investor behaviour and changing regulations governing a significant part of our target market. Tactically, there are advantages to starting when the market is relatively weak as fixed costs can be lower, including rents, and the talent pool is more accessible as many established firms are losing people."
He added: "For clients, a period of relatively weaker portfolio performance can change perspectives. It is typically a time to review service providers … something that is less likely when markets are trending positively. Investors are becoming accustomed to lower returns and higher volatility and as a result are seeking new ideas and new solutions."
Analysts said CCAM's selling point is that its parent, Conning, is a well-known US fund house special-ising in serving insurance companies and other institutional investors with US$88 billion under management.
Konyn said the many sophisticated tools developed by Conning will help CCAM serve insurers, sovereign wealth funds and pension funds in the region, particularly those looking to make the most efficient use of their capital, which, he said, is becoming more critical for many institutions.
"We are targeting insurance companies, sovereign wealth funds, corporates and pensions who need to go beyond the traditional benchmark or index-driven approach.
"We are not offering our own retail funds and are focusing on investors who need more on the risk management side," Konyn said.
Konyn said Conning, which has had no operations in Asia before CCAM was established, would like to see CCAM develop as the platform to expand Conning into the region. He believes that the insurance sector in Asia is growing fast and many are outsourcing fund management to independent houses.
Cathay, a large insurance company and financial conglomerate based in Taiwan, will be investing with CCAM and provide the cash to establish CCAM's credentials.
"It is the unique set of circumstances of being a start-up with seed money and strong financial backing at a time of industry consolidation that will support our development," Konyn said.
CCAM is not the only one braving the markets at a difficult time. Bank of China Hong Kong Asset Management has teamed up with the World Bank to launch new funds. Its chief executive King Au said the response has been strong.
BEA Union Investment, a joint venture between BEA and Germany's Union Investment, is another example.
Though the joint venture was set up in 2007, this year it is moving into the next development phase under chief executive Eleanor Wan, who is revamping the business.
"The current market environment is a good opportunity for acquiring good and experienced professionals," she said. "We are not eyeing a return tomorrow but we are targeting long-term growth in Asia, particularly China," she said.