Treasury Practice

Problem Solved: Fabian Boklage, Henkel

Published: Jan 2012

After years of having a debt laden operation in China, Henkel has been generating strong cash flows in the country since 2009 and has found itself with surplus cash to invest.


Fabian Boklage portrait

Fabian Boklage

Regional Treasury Manager, Asia Pacific

Henkel is one of the world’s leading producers of detergents, cosmetics and adhesives. Founded in 1876, the Düsseldorf-based company has gone on to establish footholds in European, American and Asian markets, employing some 48,000 people across the world. In 2010, Henkel’s sales increased by 11.2% to over €15 billion, with 41% of that figure attributed to demand in emerging markets such as China. The Asian Tiger economy is expected to become the second most important market for Henkel in terms of annual sales by 2015.


“Faced with unpredictable regulatory conditions and a rapidly changing economic environment, Henkel needed to overcome the challenge of managing its cash surplus more effectively,” says Fabian Boklage, Regional Treasury Manager, Asia Pacific. “The company’s cash management strategy, which is underpinned by an RMB pooling solution, centred on two core concerns,” he explains.

Firstly, in order to sustain its double digit growth, the company required a sufficient level of liquidity so as to be able to fund its daily operations and new investments. Secondly, soaring economic growth in China has led to high inflation, meaning that overnight bank deposits register negative real yields. “Regulation is a big issue for us, as deposit rates are far below inflation levels,” adds Boklage.

Moreover, “Henkel has a centralised treasury organisation with a global policy. Financial investments in China need to be aligned with our headquarters. The market for higher yielding short-term deposits (structured deposits) does not meet our expectations in terms of transparency”. As such, Henkel was finding it difficult to know where to place its surplus RMB cash in the short term to achieve yield whilst not compromising on security or liquidity.

“We knew that we must be able to achieve better returns than we were on our deposits and we started to look for smarter renminbi-denominated investments,” comments Boklage. “We wanted to take advantage of the renminbi appreciation and the relatively high yields, in comparison to euro and US dollar yields, but naturally we also have a risk tolerance.”


In overcoming this short-term investment challenge – and with the additional objective of wanting to diversify the company’s counterparty risks – Henkel turned to J.P. Morgan Asset Management and its onshore AAA rated RMB money market fund (MMF), which was the first of its kind to be established in China.

The fund is managed by China Investment Fund Management (CIFM), a joint venture between J.P. Morgan Asset Management and Shanghai International Trust and Investment Co Ltd., with direct oversight by J.P. Morgan Asset Management. The CIFM RMB MMF, as it is known, was launched in early 2005 and Henkel has been investing in the fund since June 2011.

Not only did the fund offer an excellent track record, with its top notch rating, Henkel was also pleased with the transparency that this provided. Furthermore, J.P. Morgan Asset Management was able to offer Henkel T+1 liquidity through the fund, matching a core need of Henkel’s dynamic business environment in China. Another advantage of such an investment is that, while interest earned on bank deposits in China are subject to tax, roughly 25%, dividends from money market fund investments are exempt from such duties.

Boklage believes that the combination of the liquidity benefits and the safety and transparency of the CIFM RMB MMF make it an ideal tool for treasurers looking to invest surplus cash onshore in China, whilst achieving a decent return. In addition, the fund has the ability to handle large liquidity flows equivalent to $2 billion. “My personal opinion is that J.P. Morgan Asset Management is offering a very useful, value-added product here. Without it, investing in China is extremely challenging and time consuming,” he concludes.

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