“If you’re in the fund management business, I have bad news for you. We think of this as a growth industry. It’s not really a growth industry.” With this opening statement, Daniel Celeghin, Partner, Head of Asia Pacific, Casey Quirk certainly got the audience’s attention.
Daniel presented figures showing some sobering trends in the asset management sector. First he said, a sector used to net new flow growth of 6-9% a year needed to get used to 2% instead. Next, both fees and distribution productivity were also heading down. Finally, Daniel said, asset management was facing a new reality in which potential mostly came through churn, rather than growth.
China, Daniel told the session, was the only at-scale market with meaningful and sustained net new flows. To be successful in the region, managers needed to do four things. Prioritise growing investor channels, rethink distribution budget, strengthen product offering and define near-term China strategy.
The panel which followed Daniel’s presentation discussed the prospects for the industry in the region. Eric Mogelof, Head Asia Pacific, Pimco was positive. “We’re are incredibly enthusiastic about the Asia region and do see a fair number of growth opportunities. I would agree that investor demands and preferences are evolving and shifting very quickly so one of the challenges for asset managers overall is to ensure that the product and investment solutions that are being offered are relevant to the underlying client pool.”
Amy Cho, Pictet Asset Management, agreed. “Asia is a high growth region that we have identified, particularly the north Asia region. The growth rate may seem to have slowed but I think on an overall wallet size basis the depth and breadth is quite appealing to managers domestically but also to foreign managers globally.”
Peng Chen, CEO, Asia Ex Japan, Dimensional Fund Advisors, pointed out that different firms would exploit the opportunities in different ways. “These are great numbers from a global or regional perspective. However, I think for each one of us at the end of the day we have to play it to our comparative advantage. Each one of us is different so I think the implications will also be different.”
There was widespread acknowledgement that the short-term Asian growth prospects were not the same as the long-term ones. Jeff Lim, Executive Director, Harvest Global Investments Limited, said, “We think there is still very much room for organic growth. We are thankful that we are in a growth market, that gives us strong support for expansion globally. We recognise through the experience of the more developed markets that eventually growth will slow. We are preparing. We are setting up more offices in Europe and the US. Our approach is basically very targeted, yet patient.”
The audience were asked to vote on where they thought technology would have the greatest impact on distribution in Asia in the next two years.
The poll showed strong support for two areas: The D2C sector via online distribution, with 39% of the votes and traditional channels adopting FinTech drawing 46% of the vote. Only 11% thought Robo-advisors would have the greatest impact.
Jeff Lim, Executive Director, Harvest Global Investments Limited, thought the results were interesting. “Through the traditional channels, the bank distributors, a manager doesn’t really have control because the distributors have probably signed up a lot of fund houses and your particular asset class may not be flavour of the month, for instance. In China what we have done is develop the mobile app and the internet platform. Basically new channels for us to approach the client directly. And that actually has been very successful. “
Eric Mogelof, Head Asia Pacific, Pimco, said he had a clear focus. “Our approach has been to be very hands on. We’ve got distribution agreements with all the major banks. We’re getting more boots on the ground, we’re spending more marketing dollar. Every market is a little different, you do need to adapt the approach you take for each one.”
The session ended with another poll on what audience member’s fund product priority for Asia would be over the next 3 years.
UCITS and MRF Funds came at the top of the list. ASEAN Passport Funds received no votes at all.
Amy Cho said she was not surprised. “I think over the near term, 3-5 years, UCITS will still be a core offering that we will make available to Asian investors. Going forward through I think local to local will become increasingly more important. “