Asset Managers – adapt to Asian markets taste

According to AT Kearney, 23% of AUM in Asia (USD4.4 trillion) were managed from western asset managers by December 2014. While the West keeps dominating the global investment funds industry, the current redraw of global wealth to the Far East is shifting likewise the asset management centres and distribution schemes .

Many are gathering at the gate with the hope of cracking the market with the same tools and products they distribute on their own domestic market..but is it stil workable?

Forget a “take it or leave it” strategy and adapt your offer

Penetrating the Asian market without local support or partnership when you are still a boutique sized Asset Manager can be very enduring and time consuming. Don’t get it wrong: superior investment performance won’t guarantee you an easier market penetration. Competition is fierce and you’ll need to adapt to local market “taste” as it can be radically different from a EU or US perspective.

A rising local asset management industry eager to similarly tap into global markets..

Asia’s moving fast and is definitely ready to play in the big arena, ie. developing its own asset management industry and UCITs like funds label.

Asian fund houses are soaring in China and so are they in Singapore: according to MAS latest datas, total Assets managed by local asset managers in Singapore soared 30% in 2014 and 38 new licenses were granted to local fund managers.

According to the above, boutique asset managers without local representative office should consider alternative ways of distribution: partnership with local institutions and/or white labelling strategies with local larger players provided that products are adapted to local expectations.

Soon to be, the pan-asian distribution scheme will definitely ease distribution of locally branded funds..

Alhough still immature and fragmented, the Asian continent is on track to build up a multilateral investment funds framework capable of facilitating the distribution of funds throughout the regions. According to a recent report from AT Kearney, about USD600bn of assets (11% of the Asian mutual fund market) could be managed under such framework by 2030.

So far, the framework is totally fragmented with several projects having come alive over the last months: the Asean CSI (Singapore, Malaysia, Thailand) on one side and the Hong Kong–China scheme on the other’s. The APEC region Fund passport, expected to gather 6 countries (Singapore, Australia, Korea, New Zealand, Philippines, Thailand) is the third scheme planned to be launched in 2016.

Although some regulatory and geopolitical constraints remain, the three schemes should merge at some point, providing the region with a tremendous funds distribution channel including two of the largest markets: China and Australia.

With a UCITs like framework, don’t expect asian asset managers to limit their business appetite to Asia: they are already looking at tapping into other emerging pools of wealth (Latin America and Africa) and eager to get a foot on developed markets. As a matter of fact, western or emerging markets boutique asset managers have a card to play through strategic partnerships that will provide both parties with a profitable “give and take”.

 Forget about old school schemes

Funds distribution channels are experimenting an accelerated shift from banks to online distribution. Nothing new but datas are worth noting. According to Cerulli, bank’s market share fell from 63.3% in 2012 to 48% by end of 2014. In the meantime, direct fund sales increased and represented 16.2% by end of last year. Although global, the phenomenon is mostly pulled ahead by Asia where e-platforms and robo-advice are gaining ground very fast. This doesn’t mean the end of an industry but an industry’s necessary restructuration…technologically driven.

What to keep in mind before attempting to penetrate the Asian market?

  • Superior investment performance won’t make it easier to distribute your funds in Asia;
  • Work on your branding as Asian’s consumption instinct is definitely led by fashion flair;
  • Be present on social medias, graal for a larger audience recognition;
  • Adapt your products to local “taste” – fees, products features should be in line with local market, not the reverse;
  • Work with a local representative and / or develop partnerships.
  • And finally cultivate your patience..valuable asset when working in Asia..