Singapore’s Milltrust plans expansion of EM funds range

Asian-based fund provider Milltrust International Group is expecting to expand the range of independent emerging markets managers it makes available via an umbrella fund on the managed accounts platform of InfraHedge.

Milltrust initially has three alternative funds in its Emerging Markets Managed Accounts (EMMA) platform, a single-custody, Dublin-based Ucits umbrella fund.

These encompass the markets of Brazil (a fund advised by Bank Itau), Latin America more generally (BTG Pactual) and China (Value Partners).

Simon Hopkins, CEO of Milltrust International Group, says the firm is in advanced discussions with an institutional manager of Asean funds, and is speaking with UTI Mutual Funds, one of India’s largest managers, about offering a strategy.

Milltrust’s use of InfraHedge extends a trend prevalent among allocators to alternative funds, to want managed accounts with greater transparency and potentially liquidity, than off-the-shelf hedge funds offer.

“As the hedge fund industry gets back on its feet – as I am sure it will – and institutions start to focus more on the merits of hedge funds, we will want to offer more alternative-type exposure. Emerging markets are inherently volatile and they are therefore inherently suited to hedge fund strategies.”

Milltrust will be targeting institutional investors such as pensions and insurers as clients.

He says these groups are reviewing their EM exposures, and seeing that neither a 13% weighting in MSCI World, nor their own exposures below 5% to EMs, accord with the 50% contribution to global GDP by EMs, nor to growth forecasts for the developing world.

The community stands to funnel large amounts into EMs, Hopkins added. Some forecasts predict their having 15% to 18% over two decades, “but even if they build weightings to 8% to 10% instead, you would still be looking at $4trn coming into developing markets.

“At Milltrust we want to be building a business with a prevailing tailwind behind it,” he says.

He adds as institutions grow EM allocations, they will want managers outside those largest juggernauts that can probably absorb entire mandates in one gulp.

“We can say to the allocators, ‘here is a safe, transparent way to invest into parts of the world you are not as familiar with, via alternative strategies’.”

Hopkins brings to his task professional experience of having dealt with a number of other managed account platforms. He pointed to a number of advantages informing his choice of InfraHedge, majority-owned by State Street Corporation.

“I was attracted by InfraHedge being a seamless proposition, which brings together the risk analytics developed within State Street, with people who have been in the managed account industry for a number of years. It is fully integrated with the custodian and administrator function, and in the current environment there are enormous concerns about integrity, and risks associated with the financial services business.

“State Street is not an investment bank, it is predominantly a custody bank that has relationships with most of the big institutions, so it is a familiar partner for investors.”

Akshaya Bhargava (pictured), InfraHedge CEO, said his firm had consciously tried to create a platform using a different model to that prevalent before the 2008 crisis “as investors now need a very different proposition”.

 

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