HSBC fund arm eyes mainland China pension market, new Silk Road projects

HSBC Global Asset Management is planning to expand into more Asian markets with a focus on pension fund management and infrastructure investments arising from Beijing’s new Silk Road projects, according to the regional head of the company.

“We would like to expand into new markets in Asia where we have achieve double digit year-on-year growth in terms of assets under distribution over the last three years,” said Pedro Bastos, chief executive of Hong Kong and regional head of Asia-Pacific, HSBC Global Asset Management.

The company, part of HSBC Holdings, reported that assets under distribution in Asia in the first half grew 17 per cent year on year to US$161 billion.

Assets under management – or the amount of funds invests in Asia – stood at US$131.4 billion as of the end of June.

“Pension and wealth management will be the major focus of our expansion in Asia in the coming years,” Bastos said in an exclusive interview with the South China Morning Post.

The asset management firm is the investment manager for all MPFs under HSBC, the largest Mandatory Provident Fund provider in Hong Kong with a market share of almost 30 per cent, according to the Gadbury Report, which tracks MPF data.

HSBC Global Asset Management is also active in the pension markets in Japan, India and Taiwan.

Bastos said its next major target is mainland China, which has not yet allowed foreign investors to be involved in the pension market, but Beijing is expected to open up this sector.

“We can’t do pension business in mainland China right now but the country is in the process of reforming its pension market. Once it is opened up we will be ready to invest into it,” he said.

HSBC Global Asset Management already has a mainland Chinese joint venture called HSBC Jintrust, a joint venture between HSBC and Shanxi Trust and Investment Limited, established 10 years ago. The joint venture can sell mutual fund products on the mainland and offers funds in Hong Kong via the cross border fund sales scheme. However, it has yet to be allowed to operate in the pension business on the mainland. When China opens up its pension market, the firm will leverage the joint venture to participate in the market, Bastos said.

In looking at mutual fund sales in Asia in the first half, the best seller was the HSBC Asia High Income Bond Fund which aims to deliver higher yields than comparable funds. It raised more than US$560 million during its initial public offering in February, making it the biggest IPO by a fund in Hong Kong this year. The fund’s size has now grown to US$1.6 billion.

Other funds that topped the firm’s sales league table were those that invested in mixed assets of stocks and bonds in different parts of the world.

“This shows that investors like products that deliver a reasonable return yet at a relatively lower risk exposure. They want a good return but also want peace of mind, especially in the current low interest rate environment,” Bastos said.

He said the company will also invest on behalf of its insurance customers in Belt and Road infrastructure projects that could deliver good returns over the long term, typically 7 to 15 years for infrastructure investments.

The Belt and Road initiative, also called the New Silk Road, covers projects promoted by Beijing that include roads, railways, power plants and other infrastructure projects in 65 countries from Asia to Europe and the Middle East.

“Insurance companies have long term liabilities. Infrastructure projects are investing for the long term so they can match the liability of the insurance companies,” he said.