Fitch Affirms HFT Investment Management at 'Highest Standards(chn)'; Revises Outlook to Stable
OREANDA-NEWS. Fitch Ratings has affirmed Shanghai-based HFT Investment Management Co., LTD's (HFT IM) National Scale Asset Manager Rating at 'Highest Standards(chn)'. The Outlook has been revised to Stable from Negative. The affirmation includes HFT IM's 100% subsidiaries HFT Investment Management (HK) Limited and HFT Fortune Asset Management (HFT Fortune).
KEY RATING DRIVERS
The affirmation of HFT IM's rating is driven by the company's experience in asset management, disciplined portfolio management processes, strong risk framework, efficient operations and robust IT platforms. The rating is supported further by the company's strong position in institutional business and its ability to support mandates and investors' customisation needs.
The revision of the Outlook to Stable from Negative reflects the fading-out of the impact on the franchise due to greater investor scrutiny following personal fraud allegation against five former portfolio managers in 2014, as is evident from the large increase in assets under management (AUM) for both the mutual fund and mandate businesses. The control framework has been strengthened following these events; however, the rating would be sensitive to further adverse compliance events.
An important challenge facing the firm is staff turnover, which remained high in 2015. However, HFT has demonstrated its ability to recruit, effectively re-staffing through the year. A new CEO, appointed by the shareholders, Haitong Securities and a subsidiary of BNP Paribas Investment Partners ('Highest Standards'), was appointed in April 2015. He brings both long industry experience and an international perspective to the firm.
HFT IM's 'Highest Standards(chn)' rating is based on the following category scores:
Company: High
Controls: Highest
Investments: Highest
Operations: Highest
Technology: High
Asset Manager Ratings are assigned on a descriptive scale based on Fitch's assessment of the manager's investment and operational platform. Asset Managers are rated 'Good Standards', 'High Standards' and 'Highest Standards', relative to the standards applied by institutional investors in the relevant national market.
Asset-manager operations in the 'Highest Standards(chn)' category demonstrate an operational framework that Fitch considers superior relative to Chinese institutional standards.
Company
HFT IM benefits from an independent, distinct institutional profile, its expertise on greater China assets, and strong shareholders. HFT IM has a track record of profitability and strong expertise in serving institutional clients. HFT Fortune, which was recently established and has core competence in asset-back securitisation (ABS) transactions, is already an important contributor to the company's business.
Controls
HFT IM has an efficient risk framework, which incorporates its subsidiaries. HFT IM's risk management control set-up is multi-level, adequately staffed and aligned with international standards. Operational risk management uses a broad set of risk identification and management techniques. Portfolio compliance controls are embedded into portfolio management, pre- and post-trade. The control framework provides comprehensive assessment of business and fund risks, strengthened by the newly launched Risk Mapping programme.
HFT took steps to strengthen its compliance and control environment following an investigation into several former employees in relation to their personal trading activities in 2014. Fitch believes these changes have strengthened the control environment; however, in light of these historic issues, the rating would be highly sensitive to future compliance issues.
Investments
HFT IM's investment processes are formalised and uniformly applied across its two locations (Hong Kong and Shanghai). The quantitative and qualitative research-driven approach in both equity and fixed-income investment makes strong use of model portfolios for portfolio construction. Investment quality management is sound and responsive to identified areas of underperformance through process adjustments.
A quantitative team with three members was set up in 2015 to build stronger expertise in absolute return and hedge fund strategies through listed derivative instruments, mainly futures. An incentive programme has recently been set up to better link the research output with the portfolio performance.
Operations
HFT IM has a consolidated operational platform integrating both HFT IM and HFT Fortune. The 'Highest Standards' in the operations score reflect support from administration specialists, automated workflows between agents and the effectiveness of the operating model. Processes and procedures have been enhanced to better match the complexity of the new business. The company is capable of supporting customisation needs for institutional investors and provides relevant investor reporting.
Technology
HFT IM benefits from a well-built business platform developed around vendor front-office systems that are synchronised between the two locations. The upgraded research platform efficiently supports investment processes. Effective and tested business continuity procedures are in place. Upgrades and modernisation of the platform, eg establishment of an e-commerce distribution channel, have been made on an ongoing basis to keep pace with the fast-changing competitive and regulatory environment.
Company Profile
HFT IM is a Sino-foreign joint-venture asset management company incorporated in April 2003. Haitong Securities Co. Ltd., one of China's top-tier securities firms, owns 51% and BNP Paribas Investment Partners BE Holding, a fully-owned subsidiary of BNP Paribas Investment Partners, owns 49%. HFT HK acts as the international arm of HFT IM, and it serves the QFII (Qualified Foreign Institutional Investor) and RQFII (Renminbi Qualified Foreign Institutional Investor) business. HFT Fortune mainly engages in structuring ABS transactions, and provides financial services such as alternative investments.
HFT IM had CNY156bn of assets under management at end-2015 and employed 222 staff, of which 12 are with HFT Fortune and 14 are based in Hong Kong.
RATING SENSITIVITIES
The rating may be sensitive to material adverse changes to any of the rating drivers, notably through weakened financial conditions, heightened staff turnover compared with peers, or corporate instability. The distribution of HFT's category scores renders the overall rating sensitive to a change in any individual category score. Of these, the Controls score is most sensitive to change, notably in the event of compliance issues given their prior occurrence. A material deviation from Fitch's guidelines for any key rating driver could cause the rating to be downgraded. For additional information about Fitch's asset manager ratings guidelines, see the criteria referenced below.
Комментарии