Summer 2010

DISTRIBUTION: Hong Kong dividends

Hong-Kong-1Manulife Asset Management handles over $2bn for Hong Kong investors. Nick Fitzpatrick finds out what type of funds are most in demand. Responding to the global downturn last year, Manulife Asset Management (MAM), part of the Canadian-based insurance and financial services firm Manulife Financial, launched an Asia value dividend equity fund. “Dividends are often regarded as a cushion during hard times, providing investors with support against excessive falls in equities when the market goes through corrections,” says Raymond Kong, assistant vice president and product manager for MAM in Hong Kong.
MAM offers 28 mutual funds to predominantly retail investors in Hong Kong and uses both internal and external fund managers. The firm manages US$2.3bn (€1.8bn) for Hong Kong investors.
The dividend fund is managed by Value Partners Group, an independent asset manager in Asia Pacific. The fund, part of a global fund platform that includes a European growth fund and thematic funds like healthcare, is up 8.78% since its August 2009 launch, which compares to the MSCI AC FEE Free ex-Japan Index return of 6.13%.
Other external fund managers that Manulife uses – which number six in total – include the investment management division of banks   Société Générale and BNP Paribas, and Charlemagne Capital, an independent manager that specialises in emerging market equities.
Kong says that when selecting managers, Manulife tends to choose managers that can manage more than one fund for the firm.
The dividend fund invests in companies that derive significant income from Asia ex-Japan, such as Thailand, Taiwan, Singapore and China.
The focus of Manulife in Hong Kong is very much on Asia and emerging markets.
Kong says: “People in Hong Kong have a greater risk appetite, and emerging markets are in our backyard.”
Myles Morin, vice president, independent distribution & investment funds at Manulife (International) adds that emerging Europe is also popular among local investors.
“In Hong Kong, people want exposure to overseas markets like Russia from us. Charlemagne Capital manages emerging market Europe, and also manages other funds.”
Beyond emerging markets, Morin says that US funds have sold well lately, but the last three years have been characterised by Asia, while last year bond funds were popular.
“Bonds  are 30% of our mutual fund business now as opposed to 15% a few years ago.”
Real estate has had limited success, which is perhaps surprising, given the demand for property in Hong Kong.
“People love real estate in Hong Kong,” says Morin. “We have a couple of real estate funds, but real estate has not attracted the assets that you might imagine. Fractional ownership has not attracted people as much as the real asset has, but the real asset is priced out of most people’s reach.”
In November 2009, MAM announced it had signed an agreement to purchase Fortis Bank’s 49% ownership in ABN Amro TEDA Fund Management, a joint venture in China,  for €105m. The new joint venture, which will be called Manulife TEDA Fund Management Company, will provide traditional retail and institutional asset management across the mainland China market.  This should enable Manulife (International) to provide Hong Kong investors with access to the Chinese A-share market.
Morin says: “There is a home-country bias wherever you are, plus, if you are sitting on the doorstep of all that growth happening in China and Asia, then you are inevitably attracted to it because you live here.” ©2010 funds global

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