Global fund flow growth to be led by Asia Pacific

Although global net flows reached a seven-year high in 2013, growth will trail off from 2014-18 with Asia Pacific leading net new flow and capital appreciation, finds a survey of asset managers*.

Globally, assets under management rose to $58 trillion last year, from $52 trillion in 2012, with industry revenue expanding to $302 billion, from $261 billion.

Institutional managers extended revenue 25% last year, while retail-focused managers saw a gain of 11%. AUM growth was attributed to strong capital market performance and seven-year high net inflow.

In 2013, net new inflow grew 3.2% year-on-year, double 1.6% of 2012. Meanwhile, capital appreciation hit 10.2% in 2013, up from 3.5% in 2012 and 5.3% in 2011, although lower than 2010’s 15.8%.

But strong performance in 2013 will give way to capital appreciation growth of 5.6% and net new flow expansion of 1.5% from 2014 to 2018, the report forecasts.

However, Asia Pacific is forecast to see net new flow growth of 3.6% from 2014 to 2018, compared with 2.9% for Latin America, 1.5% for Europe and 1.3% for North America.

Capital appreciation in Asia is forecast at 6.6% over the period; while that trails Latin America’s 6.9%, it leads Europe and North America’s 6.1%.

“In Asia, the wealth and propensity to invest is there. Perhaps due to past experience or the market environment, Asian investors aren’t investing as much as they could," Madeline Ho, Natixis Global Asset Management’s head of wholesale fund distribution in Asia Pacific, told AsianInvestor.

"Nonetheless, GDP growth is relatively strong, which is coupled with an expanding middle-income segment.” 

The firm's AUM sourced from Asia grew to US$30.6 billion as of this June, from US$28.1 billion as of December last year, and net inflow reached 17 billion euros ($22.8 billion) in the first half,  surpassing 2013's 13.4 billion euros.

As well as assets and revenues reaching an all-time high, the survey found profit margins had reached pre-financial crisis levels and that net flows had shifted to outcome-oriented and higher-alpha products.

Managers continued to buildout their distribution capabilities last year, with the three-year CAGR of operating expenses in that segment reaching 11.7%, compared with administration and operations at 7.8%, management at 8.5% and investment at 5.9%.

Multi-asset funds led net inflows, with 74% of surveyed firms reporting increased investments. It was followed by non-traditional fixed income (71%), target date/target risk (69%) and global fixed income (63%) and hedge funds (63%).

In a separate report, Cerulli Associates noted that non-core fixed income products were on track to bring in more than $100 billion in 2014.

“Non-core fixed-income strategies have experienced double-digit growth from 2009 to 2012, and ended the first quarter of 2014 with close to $1 trillion in assets,” said Pamela DeBolt, associate director at Cerulli. “Since 2009, net flows into non-core fixed income mutual funds averaged a little more than $80 billion.”

Meanwhile, 89% of firms saw outflows from commodities. The asset class was followed by passive fixed income (62%), North American and Canadian equities (59%) and regional core and core plus (53%) and global equity and other developed market equity (52%).

* The 11th annual Performance Strategy survey by consultancy Casey, Quirk & Associates surveyed 90 managers from privately held, publicly traded and wholly and partly owned firms with AUM ranging from under $50 billion to more than $1 trillion worldwide. Combined they invest $25 trillion for institutions and individuals.