Published by Fund Selector Asia – 6th Sep 2018
In Hong Kong, the Canadian firm recently launched an actively-managed balanced fund that invests in ETFs, as management sets its sights on the wholesale market.
BMO Global Asset Management’s focus has been around its seven ETFs listed on the Hong Kong bourse, three of which were launched in 2014 and another four in 2016, Ravi Sriskandarajah, Hong Kong-based managing director for Asia-Pacific, told FSA.
The BMO Balanced Fund, which became an SFC-authorised product in May, is the firm’s first actively-managed fund domiciled in Hong Kong. It was launched in July.
The fund primarily invests in ETFs listed globally, with a leeway to invest up to 10% in single securities, according to Clarence Chan, Hong Kong-based managing director and head of ETFs for Asia.
Equity ETFs are allowed a 40%-80% allocation and 20%-60% can go to fixed income ETFs. The base case scenario is a 60% allocation to equities and 40% to fixed income, Chan said.
Chan hopes the product will attract investors who are concerned about concentration risks. He explained that other funds may be taking single security or single sector risks.
“By investing through ETFs, you would have an indirect diversification effect on the portfolio. For example, if you have allocation to the US and expressed it through the S&P 500, then you can get diversification across 500 securities.”
The balanced fund has 30 ETFs in its portfolio, which collectively invest in 12,000 equity and fixed income securities globally, he added.
The current management fee is 0.98%, according to the key facts statement. The ongoing charges (OCF) are capped at 1.55%, based on a 12-month period. The median OCF for a global multi-asset funds is 1.75%, while the average is 1.93%, according to FE data.
Wholesale market
BMO also has a distribution team in Hong Kong that targets institutional investors, as a lot of the ETF inflows – especially for its fixed income ETF – come from the insty segment, he noted, according to Sriskandarajah.
Recently Adrian Chan was hired as vice president for intermediary sales to target local distributors and private banks, which represent an investor base that BMO is targeting, he added.
Other firms, such as Ostrum Asset Management, have also started to target wholesale distribution as part of their strategy after building an institutional investor base.
BMO Global AM manages $265bn in assets, with nearly 60% accounting for institutional money, according to Sriskandarajah, who declined to give specific figures. In Asia, the majority of the firm’s institutional clients are based in Hong Kong, China, Korea, Japan, Australia and New Zealand, he said.
