Slated to officially launch on Thursday, 7 May, the three funds made in Hong Kong are the Baring European Equity Income fund, the Baring Greater China Equity fund and the the Baring Global Multi Asset Income fund.
The European income fund, based on an existing Baring fund sold in Japan, was launched locally because of the strong demand for income products in Asia, he said.
“The appetite for income will exist for the next couple years, as long as interest rates remain relatively low and QE is still going on.
“With QE in Europe, momentum for stocks is still positive. The income element will give a regular payout to offset volatility.”
The Greater China product has a UCITS version and the multi-asset fund leverages the firm’s expertise in the UK. But Ng said the local funds are newly-created specifically for Hong Kong.
“The RMB share class is a big differentiator. With the increasing internationalisation of the RMB, greater pools of capital are looking for somewhere to invest. The Hong Kong funds tie in nicely with that.”
Ease of use
Late last year, Baring Asset Management had announced plans to launch the trio. The funds were approved by the Hong Kong Securities and Futures Commission on 30 March.
Ng described the Hong Kong registration process as fairly painless.
“Registration is shorter than with UCITS because you’re dealing with one set of regulators. What transpired in the process was more or less in line with our expectations.”
Domiciling the funds in Hong Kong, the firm found it was easier to set up an RMB-denominated share class.
“With UCITS funds there are a lot more restrictions on what you can do. If the underlying investment is not related to the China market, you can’t have an RMB share class.”
The funds are SFC authorised for distribution to the general public. However, Ng said the mass affluent market would be the primary target, and the firm is also talking to institutional investors.
Selling Hong Kong funds in China
The locally-domiciled funds have also positioned Baring to be a first mover among global fund houses in the mutual fund recognition scheme between China and Hong Kong, which is in the planning stage.
The scheme allows cross-border sales of regulator-approved funds domiciled in Hong Kong or China without any QFII, RQFII or QDII licenses or quota required.
Earlier this year, outgoing SFC deputy chief executive Alexa Lam told the South China Morning Post that regulators on both sides are ready to start the program and only waiting on China’s State Council to give approval.
“The opportunities for the Hong Kong fund industry will be huge,” she was quoted as saying.
Ng said Baring launched the funds after an assessment of the current investment environment. Mutual recognition was not a driver, but an added bonus.
The firm “will continue to create increasingly bespoke solutions in response to investor needs – including additional locally domiciled funds”, Ng said.
Domestic funds in Asia will gain importance in the next 5-10 years as more countries decide to establish their own domiciled funds, he added.
“UCITS will still have a role to play, but maybe not as prominent as in the past.”
