The Pictet Strategic Income Fund can invest up to 100% in either equities or bonds across all demographics, or up to 35% in alternatives, such as gold, aircraft financing and REITs. The fund has no benchmark.
“The portfolio is reasonably positive and growth-oriented. It’s slightly more cyclical, but we are mindful of what the Federal Reserves does,” said London-based Shaniel Ramjee, senior investment manager on the multi-aset international team, speaking at a briefing today.
The tentative portfolio, as of August 31, is to invest 50% in equities – 28% in Asia, 13% in North America, and 9% in Europe.
In US dollar terms, the firm expects emerging market equities to return an annual 11.5% for the coming five years and 11% for emerging Asia equities in particular.
In contrast, the return forecast on US equities is 1.9% annually over five years.
“We are quite constructive on Asian equities. We are seeing stabilisation in Asian economies, with trade data picking up.”
Meanwhile, the uncertainties around the US presidential election might put downward pressure on the dollar. Another interest rate hike by the Federal Reserve could also slow domestic growth and again lead to a weaker currency.
“Our worry is how the US rate hike will affect China. It might cause a tightening in China when the country is trying to stabilise.”
In the alternative space, gold is expected to fetch an 8.3% annual return in five years, while aircraft leasing is expected to give an 8.5% yield for investors, Ramjee said.
The fund manager hopes to draw offshore yuan deposits looking for income and at a later stage, to sell across the border to mainland investors through the Mutual Recognition of Funds (MRF) scheme, said senior vice president Lawrence Tse.
The firm is stilling weighing options on whether to relocate fund managers to the SAR, or to hire more in order to meet the criteria for the MRF scheme, he added.
To become eligible as a northbound MRF fund, it has to be domiciled in the SAR, established for more than one year, with fund size no less than RMB 200m ($30m). Also, the investment management functions need to be stationed in Hong Kong.
At the moment, all three managers of this new fund are not based in the Hong Kong office, Tse noted.
New funds rolling out in Hong Kong have been focusing on income and multi assets. Most recently, the Schroders China Asset Income Fund was launched and the JPMorgan China Income Fund is expected to be launched later this month. Manulife Asset Management will also be launching four funds in coming weeks.