Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
VALUE PARTNERS
HKEx Stock Code : 00806 
 
Corporate Profile
The Group is principally engaged in value-oriented asset management businesses.

Business Review - For the year ended December 31, 2012

(I) Diverse initiatives in Hong Kong headquarters

(A) Strengthening distribution channels

For 2012, sales through our various intermediaries in Hong Kong constituted around half of the Group's gross sales. Leveraging our leading market position in the fund landscape, we have been expanding our distribution channels in the Hong Kong retail bank space and, by the end of 2012, Value Partners' fund products were on all significant retail bank platforms locally. With deepened collaboration with our retail bank partners, we saw a more complete product offering on those platforms, and we worked to add more of our funds to their ¡§focused/recommended list¡¨ for a stronger sales push. We intensified our efforts in promoting these products with branch events and seminars throughout the year, which contributed to the funds' popularity among local investors. Going forward, we will continue intensifying our existing sales efforts and enhance our marketing initiatives.

Observing that the number of high-net-worth individuals has been on a steady rise, we have been aggressively expanding our reach to this pool of investors, particularly through the network of private banks with an Asia-wide coverage. In the year, we strengthened ties with our existing private bank partners and won presence on a number of new platforms. We will be signing up additional ones, and place more funds on the existing platforms.

The channel of insurance companies has been an area that poses further penetration opportunities for the Group, where strong growth is expected in the coming years. Our exploration with insurance companies was met with success, having signed up new partners in the year for greater exposure to insurance-linked products (ILAS), which tend to generate sticky inflows into the Group.

(B) Manager of choice in MPF

Pension money from Hong Kong's Mandatory Provident Fund (¡§MPF¡¨) system is another stable source of inflow ¡V the MPF fund we manage demonstrated such stickiness with US$126 million net inflow in the year. Collaborating with a leading player in the field who commands a strong sales force and quality service platform, Value Partners has built a strong track record as an MPF manager, and the MPF fund we manage is now regarded as a popular choice among members. The said MPF fund is the largest across all active MPF fund categories, with US$2.3 billion AUM as of the end of 2012, attesting to its popularity and investor confidence in our investment team. In the entire MPF space, the total AUM amounted to US$56.7 billion by the end of 20123.

(C) Expanding global investor base

Our global investors ¡V spanning the US, Europe and Australia with clients ranging from family offices & trusts to endowments and foundations, as well as pension funds and institutions ¡V made up more than a quarter of the Group's AUM as of the end of 2012. As we believe China is the engine of global growth set to attract overseas investors, our institutional sales continued to make inroads into the United States and European institutions. In the year, we launched a UCITS-compliant fund4 for European distribution and were appointed to run a China B-share managed account for a European institution. We were also awarded a mandate to manage assets of a well-established and sizeable European pension plan. The expansion in this segment contributed to solid inflows in the second half of the year.

With a series of roadshows by our globe-trotting team covering primarily the United States, Europe and Australia, we have been laying the groundwork in uncharted territories, with which we expect to see further diversification of our investor base in the next few years.

(D) Strategic product development

Diversification is also seen in the Group's product suite, and Value Partners has ventured into other asset classes, as exemplified in our newly launched income fund and A-share fund. Seeing that investors were seeking funds with an income component at a time of high market volatility and low interest rate, we launched in March 2012 a Greater China high-yield private fund4, which recorded the biggest net inflow in the year (US$271 million) among our fund products. We also added a new class with a monthly dividend distribution feature5 to our High-Dividend Stocks Fund, which saw strong net inflow (US$177 million). The two funds helped our Group to capitalize on different opportunities across market cycles.

With the US$100 million Qualified Foreign Institutional Investors (¡§QFII¡¨) quota we received by the end of 2012, we launched in March 2013 an A-share product4 primarily for institutional investors, which was fully subscribed with US$45 million. In 2013, we will continue to enrich our product offering, with new funds already in the pipeline. Following the expansion of the Renminbi Qualified Foreign Institutional Investors (¡§RQFII¡¨) scheme as announced in March by the China Securities Regulatory Commission (CSRC) to cover Hong Kong-registered financial institutions with major business in the territory, the Group will be applying for RQFII quota to capture related business opportunities.

(E) Enriching ETF product suite

Following the listing of three new single-market exchange-traded funds (¡§ETF¡¨) capturing value opportunities in Taiwan, Korea and Japan, our ETF product suite now consists of five products, with a total AUM of US$203 million by the end of 2012. We are pleased that our Value China ETF was rated 5-star by Morningstar as of 28 February 2013, and is the only fund in the China equity ETF space to have received such top rating from the agency.

(II) Greater China development and opportunities

(A) New products, partners and opportunities with China sales

China's financial markets are undergoing a strategic reform, with liberalization attempts by the central government to broaden and deepen the capital markets. In this wave of change, our dedicated China business team has been aggressively exploring channels for business opportunities, through both banks and trust platforms.

Leveraging our long-standing experience in investing in Asian markets, we launched a Qualified Domestic Institutional Investors (¡§QDII¡¨) product for private investors in partnership with China Merchant Bank and Yinhua Fund Management. The fund raising exercise was completed with success, with more than RMB209 million (US$33 million) gathered in February 2013. We will continue to develop investment advisory products for both banks and trust platforms.

For our mainland joint venture, Value Partners Goldstate Fund Management Company Limited (¡§VP Goldstate¡¨), we acquired 49% of the company in March 2012 at HK$49.9 million, and further injected HK$57.2 million in October. VP Goldstate had a 70-strong team and RMB1.4 billion (US$219 million) AUM by the end of 2012.

(B) Vast opportunities across the strait

As China liberalizes its capital accounts and reforms the financial system, we believe its fund market will thrive and Hong Kong asset managers will likely benefit. We are seeing huge opportunities as ties between the mainland and Hong Kong grow closer under the Closer Economic Partnership Arrangement (CEPA). In the year, we made our foray into China's Qianhai Bay Economic Zone ¡V within a half-hour commuting radius of Hong Kong situating on the outskirts of Shenzhen ¡V where rapid progress has been witnessed of late. Upon our signing of a Memorandum of Understanding with the Authority of Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone of Shenzhen in July 2012, we have been working closely with the authorities. We are hopeful that we will be able to capitalize on the favorable policies to be introduced in Qianhai and realize the business potential there.

Across the strait, we have successfully rebuilt the investment team of Value Partners Concord Asset Management Company Limited (¡§VP Concord¡¨), our joint venture arm in Taiwan. VP Concord is strategically positioned as a Greater China expert on the Island where opportunities are driven by tighter cross-strait financial cooperation. RMB opportunities will be abound in Taiwan with the crossstrait settlement setting in place, while expanding QFII and RQFII quotas for the territory means more investment opportunities. VP Concord launched a Dim Sum bond fund4 in 2012, and the company's AUM as of the end of the year was at NT$560 million (US$19 million). A newly launched Greater China equity fund4 brought the AUM of our Taiwan business to approximately NT$2.5 billion (US$84 million) by the end of February 2013.

For our Chengdu venture, Chengdu Vision Credit Limited, which focuses on micro-financing in the city, the loan size stood at RMB6.8 million by the end of 2012. We are particularly pleased that the company was among the 15 small loan companies ¡V out of more than 5,000 of its competitors in China ¡V to receive a ¡§2012 Small Loan Company with Most Potential¡¨ award in January 2013 from China's Small-Loan Company Association.

Business Outlook - For the year ended December 31, 2012

From the beginning, Value Partners' success has depended very much on fund performance, and this remains our highest priority. Value Partners has put tremendous resources and thinking into making value-investing work on a large scale in Asia. In 2012, we expanded further our Investment Team and enhanced the team's sector specialization system, which ensures that we have specialists to cover every major market sector. Value Partners' corporate mission, as previously stated, is to build a ¡§Temple of Value-Investing¡¨ for Asia, and in 2012, our team conducted around 2,500 company visits in the region, with a major focus on the Greater China region.

Our experience teaches us that while fund performance is key, it is also very important to build a full support infrastructure. In Value Partners, we now have a complete range of support systems within the group, including legal and compliance, risk management, client services, portfolio administration, information technology, auditing and accounting, human resources and corporate communications. We consider this a major achievement, as in Hong Kong, it is usually only the big foreign institutions that possess the resources to enjoy full-fledged support systems in-house.

To report on another achievement: we just learnt that Value Partners has captured two of the latest Lipper Fund Awards (Hong Kong)1 ¡V our Chinese Mainland Focus Fund and China Greenchip Fund were the winners in the China equity and Greater China equity categories, for their performance over five years. These add to our harvest of more than 70 performance awards and prizes that have been won through our history, with the first award (from Micropal) received in 1994, a year after inception.

Finally, a quick point about China. It was only towards the end of 2012 that we saw a tentative recovery in China-related stocks. There is a decent chance that this is the beginning of a new market cycle for China-related stockmarkets. It is sometimes forgotten that stocks in mainland China crashed in the second half of 2007, even before the global market crash of 2008. After so many years, a recovery in Chinese equities seems due, especially since the much-feared hard landing in the economy hasn't happened.

Source: Value Partners Group (00806) Annual Results Announcement
Chairman CHEAH Cheng Hye Issued Capital (shares) 1,755M
Par Value HKD 0.1 Market Capitalisation (HKD) 7,951M
 
Login
Password
Register  Forget Password
Advanced Search
© 2024 The Standard, The Standard Newspapers Publishing Ltd.
Home | Business | Metro | Focus | Opinion | Markets | World | Sports | Entertainment | Monday Money | Property | Macau | Weekend