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Asia asset management: ready, set, go

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

Asia’s asset management industry has gained rapid momentum in recent years, outpacing growth anywhere else in the world.

Liberalisation, deepening capital markets and ageing 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 Boston Consulting Group report.

The 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.

Going digital will be a game changer

In the 1980s and 1990s, 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, customised asset allocation advice available at the touch of button could help individuals learn more about how investment products work.

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.

As Asia’s asset management industry continues to grow, investment products will become more widely understood and accepted, and new passport initiatives and digital technology will allow funds to be distributed more widely, giving international asset managers a golden opportunity to carve out strong market positions and establish their brands.

The next 10 years will be an exciting time for Asia’s asset management industry. By the end of 2025, you can expect the industry to be far bigger, more mature and a significant part of the global fund management industry.

Get more insights into Asia’s asset management industry in our new report, Asian asset management’s inflection point.