Gerard Lee Opalesque Industry Update – Chinese asset managers will “fire the first shot” in major foreign acquisitions which could trigger an Asean M&A spree to be followed by “the Koreans and Indians,” declared Gerard Lee, CEO of Lion Global Investors.
In a report, Lee said he believed Asian asset managers will get bored waiting to grow organically and will instead leap to key acquisitions to go to the next state of regional growth.
He was quoted as saying, “All you need is for someone to fire the first shot in China and the rest will follow. I expect others in Japan to follow the path that Nikko has taken, and I expect the Indians and Koreans to do the same. So for those of us with small AUM, our strategy is just to be very good at what we are doing and play our game [in the hope of being acquired].”
Lee was specifically referencing the positions taken by Anthony Ho, deputy CEO of China Asset Management (HK), and Lindsay Wright, vice-chairman of Harvest Global Investment, two of the and best-placed fund firms in China who also attended the Asia Fund Forum in Hong Kong last week.
Ho had dismissed looking to any major acquisitions to drive AuM growth, and disclosed that his firm is focused in developing its investment capability by hiring home-grown talents and Asian portfolio managers as part of its plan to grow organically.
But he also added that China Asset is also open to discuss joint-venture agreements with foreign firms with a strong distribution network which the firm lacks outside China.
Wright supported Ho and pointed out that the best approach at this stage is to increase Harvest’s investment capabilities.
But Lee maintained Chinese managers will duplicate the strategy of Nikko AM which acquired DBS Asset Management late last year.
Indeed Chinese fund managers are in a good position to make a major M&A push.
A report by Hedge fund data tracker HedgeFund.net entitled HFN Regional Focus Report: China, showed that investors “have continued to allocate to the group despite performance, lagging behind both the broad hedge fund industry and the MSCI Golden Dragon Index.”
According to HFN, China’s hedge fund assets expanded by 23% last year compared to the aggregate growth for the whole industry at 14%. China fund saw an inflow of $3.5bn in 2010 to reach $18.68bn, even as their 6.11% gains were short of the global industry average of 10.55%.
In February, China-focused hedge funds were down 1.00% (-1.88% YTD).
“The hedge fund business in China appears to be booming, but at a time when the Chinese industrial landscape is being reined in. Hedge fund AUM invested in the region increased rapidly in recent months due to new allocations. The concentration of China focused fund managers located in Hong Kong and China has increased and the world’s largest hedge fund administrator, Citco, recently announced it is scaling up its presence in the country,” HFN said in the report.