The Hong Kong Jockey Club has handed out two new mandates to external fund managers, in the process becoming the first Asian institutional investor to enter a multi-manager program.
The club awarded SEI Investments and Alliance Capital with mandates in excess of $150 million each, both representing new assets as opposed to replacing existing managers. For both firms it is the first time they have won mandates from the Jockey Club.
"This is the start of our relationship and we're very pleased," says June Wong, who heads regional institutional marketing at Alliance in Hong Kong, where the firm operates under its local joint venture with Sun Hung Kai as New-Alliance Asset Management. That JV was founded in 1997. New York-based Alliance has $481 billion of assets under management and is majority-owned by AXA Financial.
Alliance will run money for a global balanced mandate, which is a typical one from the Jockey Club. Its mandate to SEI, however, strikes new ground by taking the multi-manager approach.
"This approach, whilst not new in the US and Europe, should be the first time, as I was led to believe, for an institutional investor in Hong Kong," says Jacob Tsang, group treasurer at the club.
Under the multi-manager approach, SEI will search out, monitor and hire and fire specialist managers in a variety of asset classes. The Jockey Club went down a similar route two years ago when it first invested in funds of hedge funds, but it has now taken the same logic and applied it to traditional asset classes.
"The Jockey Club doesn't buy into the idea of star portfolio managers," says Joseph Ujobai, London-based executive vice president and head of SEI Global Investments, the Oaks, Pennsylvania firm's non-US business. "They wanted to use specialists but stars and specialist managers are hard to monitor and manage. We can help them with that."
This represents an experiment for the Jockey Club to use specialists as opposed to its normal practice of hiring global balanced managers.
The mandate is a breakthrough for SEI, which manages $100 billion in multi-manager mandates globally, 15% ex-US in Canada and Europe. Although it has long had a branch office in Hong Kong run by regional managing director Vincent Chu, only recently had SEI Global begun institutional marketing (done from London, not Hong Kong, as the firm lacks the appropriate licensing).
Although SEI has more traditional fund JVs in Korea and Taiwan, the Hong Kong office had been more focused on distribution relationships, scoring a breakthrough last year when it was hired to provide multi-manager product to private bank HSBC Republic.
As a result of the Jockey Club win, however, SEI is going to beef up its Hong Kong presence, says Ujobai. It is in the process of registering itself as an investment advisor with Hong Kong's Securities and Futures Commission, and is likely to register itself in other Asian jurisdictions.
It will also beef up its Asian investment management capability. SEI now has one person in Hong Kong who helps structure and implement portfolios, but most fund management monitoring and searching is done out of the US or London. However, as institutional clients tend to have a home bias, SEI wants to boost its capability to research Asia-based portfolio managers.
"If we build out our Asia business, these clients will want to have more assets under management invested in the region, and we need to have the capability of constructing portfolios in these markets," says Ujobai.
The firm has also recently hired a business development official, whom Ujobai couldn't yet name. All of these roles will report to Chu. The firm is also considering setting up a presence in Japan.
The SEI win highlights the embryonic trend toward multi-management in Asia. To date Russell Investment enjoyed early success, managing around $1.5 billion for Japanese institutions as well as $500 million of retail money in Singapore via a JV with DBS. Northern Trust has also trolled the Japanese market, while HSBC Asset Management, a relative newcomer to the multi-manager industry, has recently begun targeting retail and institutional clients in Hong Kong. Boston-based consultancy Cerulli Associates estimates global multi-manager assets will hit $1 trillion by 2007.