Driving demand for alternatives (alts) – private equity, property, hedge funds and infrastructure – are investors in the region taking on a higher risk profile to achieve higher returns, McCaffery told our sister publication Fund Selector Asia on a recent trip to Hong Kong.
“Chinese capital has been flowing offshore and searching for higher yield. Since outflows have accelerated, we’ve seen intermediaries more embracing of alternatives as well as traditional asset classes.”
Additionally, “private banks and intermediaries in Asia are doing more research and having interesting conversations around alts”, he said.
“In Hong Kong and China there is so much investment activity and [alternatives] are resonating with investors so we’ll take an active and ambitious approach.”
The alternatives opportunity in Asia has been noted by several firms that plan to build up their alts proposition in the region. They include OMGI, AQR capital Management and Carret Private Investments, FSA reported earlier.
McCaffery admitted a key challenge was the market perception of Aberdeen as an emerging markets specialist.
“The challenge is getting investors to know who we are and what do now. Aberdeen has been seen as a proxy for emerging markets, but that has changed dramatically in recent years and our diversification has been notable the last 2-3 years.”
A 2014 acquisition of Scottish Widows Investment Partnership from Lloyds Banking Group enhanced multi-asset capability and last year’s buyout of private equity firm Flag added to alternatives.
The “solutions” business — which includes alternatives as well as multi-asset and quantitative investment – now makes up 49% of group AUM, which was $402.9bn (£307bn, €403bn) as of 30 June 2016, according to the firm.
Aberdeen has also been building multi-asset capability in Asia. In Hong Kong, Irene Goh was brought in from Alliance Bernstein in May to head multi-asset solutions for Asia-Pacific, a newly-created role. She manages the multi-asset portfolio in the region and will build a team as well.
“We will see our resources increase in Asia over time,” McCaffery said. “From investors in the region who want to allocate globally and outside investors, European investors, who want dedicated Asian portfolios.”
The multi-asset value proposition to investors is straightforward, he believes. “Genuine diversification and strategic asset allocations to produce low returns in mid-single digit figures.
“If the client wants to preserve his capital, then the conversation is about making sure he has diversification across a range of asset classes, returns and income from a variety of sources.”
Aberdeen’s Asia AUM is $76bn. Currently, 34 funds, both equity and fixed income, are authorised for sale in Hong Kong. Two UCITS alts products are avaialble, but they are not yet registered for sale in the region.
Eventually the firm will develop Hong Kong-domiciled funds, he added.
“We’ll create flavours of alternative funds,” McCaffery said. “The product mix depends on regulations and on what both institutional and retail investors can consider. A Hong Kong domiciled fund, for example, might have more of a bias toward Asia than global [exposure].”