Expertise with focus on the East

Karine Hirn is one of the company’s leading pillars and serves as a Partner at East Capital. She has held various roles within East Capital, primarily focusing on sales, business development, and communications. She is currently based in the vibrant city of Hong Kong after having lived three years in Shanghai.
Luxembourg for Finance spoke with Ms Hirn about the latest trends in the Chinese equity markets and the reasons why East Capital chose to be domiciled in Luxembourg.
Which activities does East Capital run from Luxembourg?
We have a Chapter 15 Management Company license (since March 2013) specialised in the management of UCITS from an operational, risk and compliance perspective (we outsource investment management, custody and administration). We manage all of our UCITS funds from Luxembourg. In October 2013 we connected our flagship Swedish UCITS range with our Luxembourg SICAV umbrella via a cross-border master-feeder structure, a possibility provided by UCITS IV. We believe that we were one of the first to execute such a management model. Furthermore we have just received verbal approval of our license upgrade to become (what is known in Luxembourg as a super management company i.e. becoming an ‘alternative investment fund manager’ as well). This will allow our Luxembourg management company to manage our alternative funds starting with our existing Lux SIF umbrella holding six active compartments. Ultimately our aim is to use Luxembourg as a management competence centre for our entire fund range (across the three pillars of assets classes we manage). This may extend to other functions (i.e investment management) in Luxembourg as we seek to further consolidate our operational model and draw further efficiencies and economies of scale offered by centralising management and regulation to one main jurisdiction.
Why have you chosen Luxembourg? How would you compare it with other financial centres?
We made a decision back in 2006 to choose Luxembourg as a domicile (we considered Ireland as well) for our internationally marketed UCITS, a decision we feel is justified considering the major success of the UCITS brand worldwide. Luxembourg continues to be at the forefront of UCITS regulation and offers advanced, experienced and competitive administration partners to support our fund operations. Adding AIFM is a logical step forward for us and considering its alignment to the retail focused UCITS regulation Luxembourg is well placed to support these funds. Considering our alternative funds are essentially quite plain vanilla they can be serviced well in Luxembourg and wecan benefit from the AIFM passporting regime and still have good know-how and legal support in Luxembourg (perhaps some hedge funds and more complex strategies may feel better supported elsewhere, also depending on their client base and if they are a European manager or not). As an onshore European fund manager Luxembourg is also well aligned with our core distribution strategy but we will adapt as necessary to meet our growth plans and client needs.
What is your vision for East Capital in the future?
Our vision remains the same as when we started the firm; to release the potential of East Capital Universe through the investments we make. Emerging and frontier markets offer exciting opportunities but require a specific approach in terms of investment strategy and risk management. Ours is based on a long-term approach, active stock picking and local presence.
Can you elaborate about the needs for public equity in China? What is the added-value?
The Chinese equity markets are among the largest in the world in terms of market capitalisation but very few foreign investors have knowledge and experience of these markets since there are many restrictions to access them. In a way they are like frontier markets without the problem of liquidity and size! This is however about to change. The QFII and the RQFII programs are being developed, Hong Kong and Shanghai stock exchanges have recently announced that before the end of the year they will put in place a mutual connectivity mechanism, and almost on a weekly basis we hear about new initiatives and reforms. In June index provider MSCI announced that they will wait with the progressive inclusion of A-shares into their benchmarks, this remains under review for the coming period and is expected to happen sooner or later.
The Chinese have a good track record of getting things done and they have clearly embarked on a very significant roadmap that will transform tomorrow’s global capital markets. We are excited about this as we have seen other markets going through transition time and know that these usually imply attractive opportunities for investors.
Luxembourg for Finance newsletter, Special Asia Magazine – June/July 2014
Photo: Karine Hirn, East Capital