UBS Asset Management has kicked its Greater China business into a higher gear this year, according to Fu Teh-hsiu, regional director for the sub-region. The following is a brief outline of where the firm stands in Hong Kong, Taiwan and the Peoples Republic of China:
Until recently Hong Kong was an account management centre for institutional clients, but the actual investment practice occurred elsewhere. UBS Asset Management pitched itself as a price-value specialist in global securities. It has an existing investment management presence in Singapore, Japan and Australia, but the firm decided it could boost its Greater China institutional business by emphasizing its local fund management capabilities. Therefore, earlier this year the firm started a three-person equities fund management team based in Hong Kong.
Fu says this team will grow to include fixed-income asset managers and a dealing desk later this year. He declined to spell out how many hires the office will make. The initial team is comprised of existing UBS Asset Management staff, one already based in Hong Kong plus two managers transferred from other locations. The team has already participated in several Requests For Proposals (RFPs) for Greater China equities mandates, although Fu declined to specify what mandates have been won so far. This demonstrates our serious commitment to Hong Kong and the Greater China market, Fu says. He adds the Singapore office continues to grow as well.
UBS Asset Management does have a retail presence in Hong Kong, with a line of mutual funds authorized by the Securities and Futures Commission. Distribution is largely handled by the private bank arm of UBS.
This month will see the launch of UBS Asset Managements domestic business in Taiwan. Last September the firm purchased an 82% stake in Fortune Investment Trust Co., which has been renamed UBS Asset Management (Taiwan). Fortunes main asset was its Securities Investment Trust Enterprise (SITE) license, which allows the onshore marketing of unit trusts. As a result, the firm is now selling the UBS Kangaroo Balanced Fund, the marketing for which should close this month.
The firm has also just won last month an investment advisory license, which allows it to provide discretionary fund management services to high-net worth and institutional clients. Fu says this new business can go active as of May or June.
This completes the firms product range. It already owns a Securities Investment Consulting Enterprise (SICE) license, which allows it to advise (but not sell) clients on investments, including about 20 UBS Asset Management offshore funds, which can be purchased through banks in Taiwan.
No foreign fund managers have an existing China business. Like many competitors, UBS Asset Management is in talks with a number of existing mainland fund management and securities houses. After China enters the World Trade Organization it will allow foreign firms to take minority stakes in Sino-foreign asset management joint ventures. Fu is interested in exploring this possibility. There is nothing confirmed but we are speaking with potential interested parties, he says.
But the regulatory situation in China remains a muddle. At present, the mutual fund and the pension markets are kept separate. Fund management companies in China can only offer closed-end mutual funds, although Hua An Fund Management has recently been given the green light to launch open-ended funds. (Hua An has signed technical cooperation agreements with JF Funds.) They can not manage money on a discretionary basis. UBS Asset Management has existing institutional clients from mainland China, and runs their account management from Hong Kong. The firm is keen to develop onshore fund management business provided the regulatory environment allows it to do so. But for now this remains an intermediate strategy for the next six to 12 months.