Asia is the world’s fastest-growing region. For investors this means that they have an opportunity to benefit from Asia’s unprecedented growth. However, Asian asset managers are still underrepresented in Europe and only a small number have been successful in developing their brand in the region. We talked to Timothy Walkley, Managing Director Asia Markets at FundRock, about Asia-based asset managers and their chances in Europe.
AsiaFundManagers.com: Why are – until now – not many Asia-based asset managers active in Europe?
Timothy Walkley: Obviously, the uncertain macro environment and volatility has slowed the growth of Asian focussed investment strategies. Therefore investor sentiment led to a dampening of inflows and rebalancing to other markets.
There is also strong competition with many well-established European-based asset managers (AM) offering very similar investment strategies to their Asia-based AM peers. For European institutional investors, continuing to allocate to your existing well-known European-based AM for Asia-focussed investment strategies reduces the manager risk. New allocations to a lesser known Asian asset manager mean a higher investment risk for investors.
Only a small number of Asian asset managers have been successful in developing their brand in Europe. Although being well known in their home Asian markets, only few have managed to launch products with a unique investment strategy which is attractive to European investors and raise significant AUM.
For Asia-based AMs setting up a fund in Europe is the easy part. But distributing the fund and finding European investors is not.
AsiaFundManagers.com: What are the main obstacles for Asian asset managers wanting to enter the European market?
Timothy Walkley: Distribution and branding are the primary hurdles for Asia-based AMs entering the European market.
There is usually different character of investor in Europe as compared to Asia. Fund selectors and institutional investors are key fund buyers in Europe whereas Asia-based distribution is dominated by retail banks. Fund platforms are also an important access point for European investors but are less established in Asia.
Moreover, it can also be a challenge to accommodate certain Asia-based investment strategies within a regulated European fund product. What makes it difficult are foreign ownership restrictions and liquidity requirements which exist in certain Asian markets.
AsiaFundManagers.com: What is changing right now?
Timothy Walkley: Asian asset managers are now spending more time on researching the market to determine what products to launch at the appropriate time. Furthermore they are formulating more comprehensive distribution strategies for these products. These distribution strategies can involve establishing their own sales teams in Europe, partnering with existing European based AMs or the use of third party distributors and platforms.
Furthermore, more innovative products are also being developed to address investor concerns. This includes strategies offering more persistent less volatile returns, better liquidity terms and transparency.
AsiaFundManagers.com: Do you see more demand for Asian funds right now?
Timothy Walkley: Most European institutional investors are unweight their allocation to Asia. They have struggled to identify Asia-based AMs with good long-term track records that have operated through a variety of market cycles with unique investment strategies combined with institutional levels of compliance, operations and governance.
Despite the economic headwinds in the short term facing many Asian economies company valuations in the region remain compelling when compared to other development markets at the moment.
AsiaFundManagers.com: What products are most successful at the moment?
Timothy Walkley: During the past year China A share funds were mostly in demand followed by various fixed income strategies, including Asia high yield and Asia local currency funds.
In the alternatives space the key themes for investors are similar to those seen in Europe. They include private debt, private equity, real estate and infrastructure.
There has been significant growth in multi-asset funds in Hong Kong, Singapore and Taiwan combining both traditional and alternative strategies.
AsiaFundManagers.com: What strategies will be successful in the future?
Timothy Walkley: The Asian asset managers that will be successful in the future will be those with highly effective distribution strategies. They need to establish products that can satisfy institutional investors demand for diversification and offer higher yields given the low interest rate environment. In addition, they need to capture the investment opportunities arising from the funding deficit from traditional sources and satisfy infrastructure investment demands.
Given the demand for Asia-based investment strategies from European and North American investors those Asia-based AMs that can launch attractive products have the ability to significantly grow their AUM.
AsiaFundManagers.com: Thank you very much for the interview.
Managing Director Asia Markets
Tim joined FundRock as Managing Director in 2019 and is based in Singapore. He has been actively involved in China-focussed investment activities since 1999 and covering both private and public equities.
Formerly, he was COO of GF Fund Management Co., Ltd in the UK, one of China’s largest investment managers, launching their first China A share ETF and listing it on the London Stock Exchange. He has also held senior positions as CFO of ATP’s UK and pensions and investment business. He spent over six years as Finance Director of Hermes’ Focus Funds business. Previously Tim spent four years in Beijing as group controller of a US private equity firm. He started his career in KPMG and worked across the firm’s London and Hong Kong offices.
He is a CAIA charter holder, Fellow of the Institute of Chartered Accountants of England and Wales, member of the Hong Kong Securities and Investment Institute and has a degree in Mathematics from Oxford University.