Perspective is a wonderful weapon in the arsenal of an investor. In Year of the Goat, when AsianInvestor celebrates its 15th anniversary, it’s worth reflecting on the region’s relative appeal as the US Federal Reserve moves into a cycle of monetary tightening.
Since AsianInvestor started to cover the asset management industry in 2000, there has been a 20-fold increase in the size of Asia ex-Japan’s bond markets, from $500 billion to $9.5 trillion. That’s an annualised increase of 25%.
The need for development has seen Asia’s major economies quadruple since the 1997-98 financial crisis, driven by leverage. Asia’s contribution to global GDP has risen by 10 percentage points over the past 15 years, to 30%. We explore this topic in the first of a series of articles examining the region’s growth since 2000 in the lead-up to up to AsianInvestor’s special 15th anniversary edition in May (see page 48).
So what about performance? Referencing the HSBC Asian Local Currency Bond Index, the market has provided an annualised return of almost 7% in US dollar terms over the period, against 5.6% for global credit. We predict outperformance will continue, one of 10 questions we tackle for investors in the Year of the Goat (see page 50).
Of course, when it comes to the asset management industry, the perennial question is when Asian firms will start to capitalise on the region’s growth. Cheah Cheng-hye, chairman and co-CIO of hedge fund Value Partners – a Hong Kong-based home-grown success story – has argued that a rigid adherence to Hong Kong’s doctrine of a level playing field holds back local firms, and favours big global competitors. Other Asian markets implement rules to encourage the development of domestic financial services companies.
This doesn’t quite square with the bedrock of Hong Kong’s rise as a global financial centre: its sound legal and commercial infrastructure. Multi-national competitors, moreover, use Hong Kong and Singapore as local hubs, not as ends in themselves. And Singapore boasts plenty of boutique managers.
But Cheah may have a point. In AsianInvestor’s annual list of the top 100 asset management firms by AUM sourced from Asia Pacific, it was noticeable that Chinese and Indian companies – two markets not universally recognised for their liberalised capital markets – recorded the strongest growth (see page 42).
But with the pro-business reforms of Narendra Modi and the continued liberalisation of China’s capital markets, now appears to be the best opportunity yet for fund houses – both local and global – to capitalise on regional growth. The opening of these two Asian markets will transform global securities markets. Investing in Asia won’t be a niche option, but mainstream.
12 Institutional Excellence Awards:
AsianInvestor identifies the institutions setting the standards for best practice in the region
24 Q&A: Ronald Wuijster, APG Investments
26 Roundtable: Family offices tackle the liquidity crunch
32 AsianInvestor reports from our Southeast Asian Institutional Forum
34 News: Taiwan’s BLF to issue $6.4 billion in mandates; NSSF to add foreign, PE assets
36 Thai banks stuck in second gear
Competition for wealthy clients is forcing Thai banks to develop open architecture
38 Q&A: Ernest Chan, Morgan Stanley Private Wealth Management
40 News: Julius Baer reduces BlackRock fund range; Lombard Odier partners Kasikornbank
42 India’s elephant chasing China’s dragon
Indian and Chinese firms figured strongest among the fastest-growing fund houses by Asia-Pacific AUM in AsianInvestor’s annual survey.
48 AsianInvestor’s 15th anniversary: the history and future of Asian bond markets
50 10 predictions for the Year of the Goat
54 Is Hong Kong’s ETF market losing its lustre?
58 News: UBS Global AM’s new Asia chief sets out strategy; Eurizon Capital on HK buildout
60 A leap into legitimacy?
A new network is seeking to bring price transparency to structured products. Could it transform the market?
62 Q&A: Jacob Chiu and Lucian Wu of Auda International
64 News: HT Capital to shut; Aviva deal boosts JP Morgan’s Asia footprint
66 The rule book for 2015
The five regulations that asset managers in Asia need to keep on top of this year
68 Operations manager: Frederick Reidenbach, Nikko Asset Management
70 News: Long-only firms in HK shun Stock Connect; Buy-side traders welcome FX platform
71 Trader talk: Olivier Spoor, Oclaner
04 On the move
Buy-side switch ‘unlikely’ for ex-StanChart staff; Samsung rotates group management
08 Regulatory analysis: Stock Connect shows how custodians and fund firms are on the hook over outsourcing
09 Regulatory roundup: Japan eyes RQFII status; Singapore mulls bond market changes
10 Data centre: How insurers in Asia are rethinking their allocations
72 Bookend: Japan and the Shackles of the Past, By R. Taggart Murphy