Hong Kong: Allianz Global Investors’ assets in Asia grew 40% this year, but the fund management company is becoming increasingly cautious on equity markets after their sharp run up, said a top executive on Monday.
Douglas Eu, chief executive of global insurance giant Allianz’s asset management business in Asia, told Reuters he expected the next six months to be more difficult than the last six for equity investors as many markets had run ahead of themselves, creating asset bubbles.
“There are a few bubbles forming like in the physical property market, hopefully they won’t become dangerous enough to kill us in the short term” said Eu.
Eu, who was previously a fund manager at JF Asset Management where he spent 19 years, said he expected Allianz investment managers to follow more short-term tactical strategies and remain mindful of inflation and currency risks.
Allianz’s assets in Asia, which were whittled down to around $15 billion in 2008, are back at their 2007-level of $21 billion with 25% of growth coming from new business and rest from the rally in the Asian markets.
Allianz’s assets have doubled in China, said Eu, from the 5.2 billion yuan it was managing by end-2008, while the benchmark Shanghai Composite index is up 63% after soaring more than 90% at one point.
The company, which was first foreign firm to set up its asset management business in China through a joint venture with Guotai Junan Securities, has been trailing later entrants, ranking 50th among China’s 60-odd fund managers at the end of last year.
“With our partner in China we should have been more successful in that market. But as with any emerging mutual fund market, it has been a challenge to get enough talented people,” said Eu.
Eu said investment holding periods were shorter in China with returns-focussed investors quick to move in and out of fund products.
Long road into India
Eu said he expected the company’s new asset management joint venture in India with Bajaj Finserv to turn small profits in the near term, drawing from the company’s long running insurance business.
India’s fiercely competitive fund industry is set to become even tougher for fund managers after the country’s stock market regulator abolished front-end or entry fees charged by mutual funds from 1 August, a move aimed at cutting costs for investors and to discourage aggressive selling.
India had just 0.3% of the $18.97 trillion global asset management industry in 2008, and only 7.7% of its household savings went into mutual fund, compared to 26% in the UK, according to data compiled by KPMG.
But Eu said Allianz was looking to establish an relatively early foothold in a market that is expected to grow rapidly.
“The question we have to ask ourselves, is if we go in too early we will lose money, what can we do to prevent that?” said Eu. “We have one of the most successful insurance companies in the country and our strategy in the short term is to leverage off the business our insurance company brings us.”
The joint venture company, majority owned by Allianz, is still pending regulatory approval. Eu said the companies had filed one set of applications 10 days ago and the approval would take at least nine months to come through.