When we polled our online readers this month on which funds industry development was most pressing, the top answer with 37% was cross-border distribution (see page 60). Certainly this is front-of-mind, given the launch of Hong Kong-China mutual recognition on July 1.
Yes, there’s wariness about navigating mainland China’s distribution landscape; yes, it will take time for household global names to achieve scale; and yes, there’s work to be done in aligning rules between the two sides and even intra-China (see page 8). But ultimately, any push towards borderless distribution should be welcomed. Efficiency in collaboration will lower costs and benefit all parties (with the exception of Europe’s Ucits hubs at this stage).
But what’s surprising is that banks – which still dominate distribution in Asia – do not appear to be positioning for the cross-border structural opportunity in this region. Asia Pacific has just overtaken North America in the sheer number of wealthy people, and is forecast to lead the world in regional wealth this year (see page 12). The opportunity to service retail and high-net-worth clients should be firing Asian banks’ ambitions to extend their networks and boost their distribution. Yet few have shown the ambition to become Asian champions. In this edition we have identified the five leading banks in the region, hailing from China, Malaysia and Singapore (see page 38). Interestingly, Hong Kong banks appear content to focus on Greater China, at the expense of the rest of the region. Singaporean banks, it seems, are best placed to tap Asia’s wealth, along with the well-resourced Bank of China.
On my forthcoming trip to London in July I plan to speak to distributors there about how the landscape has changed since the Retail Distribution Review was implemented at the start of 2013, banning commission payments on fund sales in favour of fee-for-advice. Their experiences should provide insights for what lies in store for banks in Asia. A glance at UK statistics from Cerulli Associates reveals large banks with tied agents selling proprietary product have a 23% market share, ahead of direct sales with 22.5%, business-to-business platforms with 19.2% and private banks/wealth managers with 16.3%. That’s a more balanced mix than in Asia, where banks (including private banks) account for 48%, followed by direct sales with 16%, IFAs with 14% and securities firms with 13%, by Cerulli data.
Separately, Asia-Pacific’s top 300 institutional investors saw 4% year-on-year growth in AUM to stand at $36.6 trillion, finds our 13th annual analysis (see page 14). At least that should keep fund houses in Asia busy this summer, especially those that take a wait-and-see approach to mutual recognition.
In this month's AsianInvestor magazine
The top 300 asset owners
Our annual ranking of the biggest institutional investors in the region. Total AUM: $36.6 trillion
Pension funds are hunting yield from complex asset classes. But elevated prices and lack of risk awareness may leave them exposed
Q&A: Huang Chao-His, director general, Bureau of Labor Funds, Taiwan
News: New thinking on China, India allocations; NCSSF to issue mandates; the tragedy of Thai asset allocation
Identifying Asia’s champions
Five Asia ex-Japan banks have shown the greatest ambition to build cross-border businesses to vie with global players
Q&A: Luigi Vignola, head of markets and investment solutions group for Asia Pacific, Julius Baer
News: mutual recognition to test JVs; Coutts looks to add multi-asset funds; CIMB disappointed by BNY Mellon’s SMA exit
Lost in Greater China
No sooner had Taiwanese fund firms learned how to survive foreign competition, along come mainland Chinese rivals
Asian equity: The region is bucking the trend of faltering emerging market growth, but of central concern is how much China’s economy will slow
Asian infrastructure: investment opportunities have lagged the region’s extreme infrastructure needs, but now it appears there’s a catalyst for change
Q&A: Archana Hingorani, chief executive, IL&FS Investment Managers
BNY Mellon IM confirms lay-offs; funds industry experiencing ‘slow death’; China A-shares ‘on track’ to join MSCI indices
On the move
Colin Brooks exits HSBC Securities Services amid reorganisation; AIA Thailand names CIO; JP Morgan AM to hire Ayaz Ebrahim; UBS adds Qian for China; Hu joins Deutsche AWM as Asia head of global client group
Operational issues and uncertainty over marketing and disclosure remain on both sides as mutual recognition goes live
Shenzhen Connect on hold; Japan outlines fiscal reform; Australia targets foreign investment; China to cap brokerages
Asia has the fastest growing population of wealthy individuals, with India emerging as the main driver of Asia-Pacific growth
Tech drama: The next revolution in our credit driven economy by Paul Schulte