Value Partners looking to link up with AMG to gain entry to U.S.

Value Partners Group Ltd., an independent, Hong Kong-listed money management firm that established an extensive footprint in Greater China in recent years, is looking to plant its flag next in the U.S.

“In 2015, we will explore opportunities to establish our presence in the U.S.,” in part by leveraging Value Partners' strategic relationship with Affiliated Managers Group Inc., a Boston-based holding company that invests in asset management firms, said Timothy Tse, Value Partners CEO, in an e-mailed response to questions.

In November 2009, AMG announced it had taken a 5% stake in Value Partners and forged a “strategic partnership,” with an agreement “to work together on joint product development and strategic distribution opportunities.” Value Partners' latest annual report for its fiscal year ended Dec. 31, 2013 showed AMG holding a 7.81% stake.

Mr. Tse said this year, Value Partners will look to “strengthen our connection with AMG and local partners,” while considering “an on-the-ground team to facilitate client service functions” in the U.S.

One leading analyst of Asia's asset management industry predicts that move could pay off for a firm well placed to benefit as China's domestic A-shares market begins to move from an off-benchmark bet to a centerpiece of global emerging markets indexes in coming years.

Value Partners has enjoyed some success on the back of a fairly attractive package of institutional qualities, including a “stable team, pretty good performance and strong alignment of interests,” as the firm's portfolio managers invest alongside clients, said Peter Alexander, founder and principal of Z-Ben Advisors, a Shanghai consultant focused on investment-related opportunities in the Greater China region.

But they could do even better by “upping their profile a little ... hiring people to really go out and attack European and U.S. markets,” he said.

The firm — which added offices in Singapore in 2014, Beijing in 2013, Taipei in 2011 and Shanghai in 2009 — reported assets under management at the end of November of US$12.6 billion, up from US$10.5 billion at the end of 2013 and US$8.1 billion at the end of 2012.

At the end of 2014, 88% of the firm's AUM was in absolute-return, long-biased equity funds, with 9% in fixed-income funds, 2% in long-short hedge funds and 1% in exchange-traded funds and quantitative strategies, said Mr. Tse.

In the marketplace for China's A shares and Hong Kong-listed H-shares, the choice for investors is often between local money managers with extensive market knowledge but less than stellar client service, and foreign firms with top-notch service but less capacity to exploit the market's inefficiencies, said Mr. Alexander.

Value Partners offers “one of the better, if not the best, hybrid approaches,” with both a strong research presence in China and, with 22 years in the business, strong client service capabilities as well, said Mr. Alexander.

“They're sort of in-between. They've been around a long time; they know the markets; they know the entities on the mainland,” he said.

In an interview, Mr. Tse said his firm's expansion to the mainland gives Value Partners a temporary head start over most competitors that the firm can look to exploit against the backdrop of a very “dynamic, hard to predict” market environment as China opens its capital markets in the coming years.

“These opportunities cannot last forever, and how much, and how quickly we can capture them is the key,” he said.

Value Partners' mainland-China-related business has been split roughly 50-50 between serving a growing list of domestic institutional investors and the cross-border opportunity of serving offshore clients investing in China through the qualified foreign institutional investor program and other conduits, he said. Its expanding domestic client roster is no longer just a handful of big sovereign investors such as China Investment Corp. and the National Council for Social Security Fund, but also local banks and insurance companies, he said.

Z-Ben's Mr. Alexander said a big question for Greater China-focused firms such as Value Partners is how much of a bias to retain toward the China market — perhaps the only remaining market in the world that “you can build a scalable platform on,” the way a previous generation of U.S.-based asset managers grew to prominence on the back of U.S. market growth.

That China focus brings both considerable long-term opportunities and vulnerability to the market's fluctuations, said Mr. Alexander.

While China remains Value Partners' brand and focus, the company is looking to broaden its business. In the interview, Mr. Tse said “I hope in 10 years, we'll not be seen as only a Greater China fund manager,” but as a regional manager, and one moving to establish a global footprint.

That will eventually call for establishing manufacturing capabilities in major financial centers in the U.S. and Europe, he said. He declined to say whether Value Partners would pursue that goal primarily through organic growth or acquisitions.