During the last quarter, BSI has added the LH Asian Trade Finance Fund and ChinaAMC Select Bond Fund onto its shelf.
The LH product is a hedge fund managed by Singapore-based EFA Group. It provides short-term, secured senior loans on a bilateral basis to companies in the commodity supply chain, the bulk of whom deal with consumer staples, such as sugar and rice.
“This fund was selected in view of the volatility in the financial markets due to events in Greece and China. The fund has been able to provide stable returns and is less susceptible to cyclical and macro events,” Lim said.
“The fund’s performance clearly demonstrates this. There were no negative months this year, during the taper tantrum in 2013, and during the financial crises 2011 and 2008,” Lim noted.
Commenting on the fund’s volatility, Lim said: “The fund has no exposure to physical commodities or commodity futures. Commodities are the underlying securities that the fund is financing. We have seen consistent returns in the range of 4-4.5% per annum."
We believe that India will benefit from lower oil prices as the country is an importer of crude. There is meaningful on-going reform, both at the state and sector level.
“We do make it clear to investors that this asset class is fairly illiquid with a monthly redemption at 60 days prior notice,” she added.
The ChinaAMC Select RMB Bond Fund focuses on the onshore corporate bond sector. Lim said that the bank decided to onboard it as a complementary offering to the Fullerton Lux RMB Bond Fund which focuses on onshore government bonds and offshore corporate bonds only.
“We have many investors who already have assets in the offshore [RMB bond] space, so by investing in an onshore fund, it can complement their existing portfolio,” Lim said.
Lim said that onboarding an alternative UCITS hedge fund is high on the agenda because the bank lacks such an offering. She noted that hedge funds are attractive given their flexibility with long-short and market-neutral strategies.
Japan, Europe and India as favoured regions
When it comes to geographic preference, Lim holds a favourable view toward European and Japanese equities.
Commenting on Europe, Lim said: "The region is attractive given its on-going economic recovery and the ECB's readiness to loosen monetary conditions. Also, the euro's weakness coupled with expanding credit could help Eurozone exporters on a trade-weighted basis."
In the case of Japan, Lim noted: "Stimulus measures initiated by the Bank of Japan would lend a boost to Japanese equities, which at present, are already at attractive values,"
India equities are also an area of interest due to an expected continuation of reform-driven GDP growth.The bank has two Indian equity funds, one focused on large-caps and one on small to mid caps, Lim said.
"Currently, we have the Aberdeen India Opportunities Fund in the large-cap space and the HDFC Mid Cap Opportunities in the mid-cap space," Lim noted.
"We believe that India will benefit from lower oil prices as the country is an importer of crude. There is meaningful on-going reform, both at the state and sector level," Lim added.
On and off-the-shelf
Lim said that the bank maintains a broad list of 60 funds on its shelf. However, the Asia-focused list is kept at a concentrated offering of 20-25 funds that are aligned with house views.
“This list of 20-25 funds is what we focus our private bankers on each week.”
Macroeconomic events, changes in a fund’s management team or capacity constraints are factors that could result in the removal of a fund off the shelf.
To illustrate her point, Lim said that BSI decided to remove a fund with un-hedged local currency exposure at the start of this year as her team was concerned about the fund’s currency risk.
She said that red flags such as macroeconomic events, a change in portfolio managers and capacity constraints could trigger the team to place a fund under review, with a subsequent downgrade or removal as possible outcomes.