Asia’s asset management industry has gained rapid momentum in recent years, outpacing growth anywhere else in the world. Liberalization, deepening capital markets and aging populations all point to more growth, making Asia a significant part of the global industry by 2025.
The number of high and ultra high net worth individuals in Asia has now surpassed North America’s to make Asia the world’s leading wealth region, with an estimated net worth of a staggering USD57 trillion, according to a 2015 Boston Consulting Group report.
Undeniable Growth Potential
Combine Asia’s huge wealth with its current market share of global investment fund assets, and the growth potential is undeniable.
Today, Asia accounts for a mere 5 per cent of global investment fund assets. By comparison, Europe’s share of investment fund assets is at 33 per cent and the US’s share stands at 48 per cent.
However, breaking through in Asia won’t necessarily be smooth sailing for asset managers. While growing wealth, low deposit rates and insufficient pension provision create a potentially huge demand, firms will first need to persuade Asian investors to buy asset management products. Today, only a small percentage of investors are comfortable doing so.
Moving to Digital Will Be a Game Changer
In the 1980’s and 1990’s, first-generation wealth creators invested narrowly, focusing on their businesses and real estate. Now, their college-educated children and grandchildren are turning to professionally-managed investments, but this is only happening slowly.
Robo advisors – online, automated wealth management services based on algorithms – are likely to be a game changer. Young consumers tend to trust information received over the internet, and having low-cost, customized asset allocation advice available at the touch of button could help individuals learn more about how investment products work.
Income, multi-asset or outcome-based funds are likely to prove popular
Alongside developing a digital strategy, asset managers looking for a share of Asia’s growth would benefit from establishing product strategies based on current economic conditions. Recent Asian equity market volatility means there is no longer a bias towards local investment, and income as well as multi-asset or outcome-based funds are likely to prove popular.
Looking into product opportunities arising from financial deepening is another good strategy, with China’s newly-opened bond market offering fresh possibilities.
The 10 Year Opportunity
This is a time of great promise for Asia’s asset management industry, comparable to the 1980s in Europe, when the UCITs directive – the European regulatory framework for investment vehicles – kick-started 30 years of growth, creating the second-largest investment fund industry in the world.
Asia’s leading economies are growing twice as fast as advanced economies, according to the IMF’s World Economic Outlook. With many studies showing a clear correlation between GDP growth and investment, 10 years of growth at this rate is likely to transform the global asset management map.
By 2025, Asia is set to make up a significant part of the global asset management industry, creating a golden opportunity for international asset managers.
Courtesy of Standard Chartered’s Beyond Borders. Read more from Jeremy Amias at Beyond Borders and be sure to share the view. Photo Credit: Agence France Presse (AFP).
About Jeremy Amias
Mr. Amias joined Standard Chartered in March 2013 and was appointed to his current role of Global Head of Financial Institutions in 2015. He has 31 years of banking experience, including 23 years at Salomon Brothers/Citigroup in London, New York and Hong Kong, specializing in fixed income and leading Asia-Pacific markets. In 2009, Jeremy co-founded a fixed income agency broker, Amias Berman & Co. He eventually sold a stake to Marex Spectron and became CEO–Asia Pacific at Marex Spectron in 2011, stepping down in February 2013 to join Standard Chartered.