Fullerton eyes defence, China real estate

Fullerton's chief executive, Mr Sekhon, said China real estate was an area where the fundamentals have improved over the last 12 to 18 months. The firm has also 'initiated interesting positions' in defence.
Fullerton's chief executive, Mr Sekhon, said China real estate was an area where the fundamentals have improved over the last 12 to 18 months. The firm has also 'initiated interesting positions' in defence. PHOTO: FULLERTON FUND MANAGEMENT

Demand for Asian fixed-income assets continues to rise as investors remain stuck in a low-growth world where bond yields in many developed markets have dipped below zero.

Demand is so strong that Fullerton Fund Management closed its popular SGD Income Fund to new investors yesterday after clients committed more than $2.1 billion in assets to it.

The fund invests mainly in investment grade corporate bonds with a focus on Singdollar bonds. It has generated 6 per cent annual returns since its 2012 launch.

Mr Manraj Sekhon, Fullerton's chief executive and chief investment officer, told The Straits Times yesterday: "There's very little growth. Whatever growth there is there's very little visibility, and as a result you've seen a lot of volatility in asset markets, especially in equity markets. That has shifted interest to fixed income."

With about 40 per cent of developed market bonds now yielding negative, investors around the world are turning to Asia, he said.

Fullerton has added $500 million in assets across its fixed-income and multi-asset portfolios this year, and Mr Sekhon plans to expand his China bond research team over the next year.

Fullerton, which identifies opportunities based on fundamental research, has China real estate on its radar, among other sectors.

"If you look across the rest of Asia, real estate is probably not an area we like a lot right now," said Mr Sekhon.

"(But) within fixed income in China, real estate is an area where fundamentals have started improving over the last 12 to 18 months."

He also noted that property sales have picked up since China reduced down payments for first-time home buyers before Chinese New Year.

Fullerton, a unit of Temasek Holdings, has raised its exposure to bank credits as well, Mr Sekhon said.

It is now marketing its USD Income Fund, which it made available to the retail market here in April. The fund made a return of 2.9 per cent over the last three months, and gives quarterly payouts.

And while Mr Sekhon feels that "equities as an asset class has begun to look a little discredited" compared to bonds, he has not ruled out stock picking.

Defence, he said, is a growing sector: "Unfortunately, there's a bit of a re-arming going on in Asia, and if you look at defence budgets across Asia they are rising, so we've initiated some interesting positions in defence."

Fullerton's assets under management stood at $13 billion at the end of last year.

A version of this article appeared in the print edition of The Straits Times on July 27, 2016, with the headline 'Fullerton eyes defence, China real estate'. Print Edition | Subscribe