The next chapter for asset management in Asia Pacific
Much has changed in the Asia-Pacific region’s asset management industry since State Street established its presence in the early 1980s. From China’s financial liberalisation to the internationalisation of Asia’s markets, the industry has become unrecognisable. The next 40 years should be equally as transformative, with Asia poised to lead the way in new and emerging areas.
Indeed, there are several key trends shaping Asian asset management that will have a considerable impact on the industry:
• Larger adoption of ESG principles
• The continued opening up of China as a market
• Emergence of new asset classes and investment strategies
• Globalisation of Asia fund managers.
These structural trends are likely to throw up new opportunities for growth, as well as some operational challenges, for asset owners and managers alike as the industry adapts to a new investment environment.
Larger adoption of ESG principles
Asset managers and owners worldwide continue to adopt and integrate ESG principles at varying levels. While Europe and the US have led ESG investment over the past decade, the trend is now taking hold in APAC.
The region’s asset managers are responding to investor demands by accelerating their adoption of ESG practices, with 94% now undertaking some level of ESG integration, with many doing so to drive better client outcomes.
But there will be significant ESG challenges for fund managers to navigate in the region.
The absence of a strong pan-regional regulator driving harmonisation, like in the EU, will likely see investors rather than policymakers become the driving force behind ESG reporting structures and frameworks. This could create uneven reporting of metrics and will most likely be one of the biggest challenges facing the region’s fund managers when using ESG data.
Continued opening up of China
The Chinese market has made significant progress in improving access for international investors over the past decade. Innovations such as the Bond Connect and Stock Connect schemes, have allowed offshore investors to get exposure to some of the world’s biggest and most exciting companies.
The process of welcoming international investors has continued, providing foreign asset managers with a greater opportunity to expand into the Asian powerhouse. The liberalisation of foreign ownership limits in 2020 could also be a game-changer, which can accelerate foreign expansion into China in the coming years.
But in a country where digital platforms are critical in fund distribution and wealth management, some asset managers may need to adapt their operations to accommodate local nuances.
Emergence of new asset classes and investment strategies
Investors are seeking out new asset classes and more sophisticated investment strategies and products as the region’s asset management industry matures. For example, passive strategies have gained traction in the region, with ETFs now a portfolio staple. Meanwhile, the search for yield has driven some investors into alternative investments.
Elsewhere, growing interest in digital assets is leading to the launch of new strategies that offer early-stage exposure to this exciting asset class.
Globalisation of Asia fund managers
APAC fund managers are also starting to expand outside their domestic markets by adopting new technologies that are transforming cross-border distribution and helping them reach new investors.
Digitisation has allowed the region’s asset managers to leverage data and adapt to rapidly changing investor demand, adopt data-driven operating models, and innovate with new products. Asset managers can now scale their businesses across the region, enter new markets and manage complex portfolios thanks to innovations in areas such as cloud technology, artificial intelligence, and risk analytics.
Meanwhile, greater consolidation creates asset management groups capable of competing with larger peers outside the region.
After four decades of evolution, asset managers and owners need a partner that understands the region and can help them seize opportunities quickly while reducing operational and investment risks.
To find out more about how State Street is positioning for the Next Chapter in Asian asset management click here.
Disclaimer:
The material presented herein is for informational purposes only. The views expressed herein are subject to change based on market and other conditions and factors. The opinions expressed herein reflect general perspectives and information and are not tailored to specific requirements, circumstances and / or investment philosophies. The information presented herein does not take into account any particular investment objectives, strategies, tax status or investment horizon. It does not constitute investment research or investment, legal, or tax advice and it should not be relied on as such. It should not be considered an offer or solicitation to buy or sell any product, service, investment, security or financial instrument or to pursue any trading or investment strategy. It does not constitute any binding contractual arrangement or commitment of any kind. State Street is not, by virtue of providing the material presented herein or otherwise, undertaking to manage money or act as your fiduciary.
You acknowledge and agree that the material presented herein is not intended to and does not, and shall not, serve as the primary basis for any investment decisions. You should evaluate and assess this material independently in light of those circumstances. We encourage you to consult your tax or financial advisor.
All material, including information from or attributed to State Street, has been obtained from sources believed to be reliable, but its accuracy is not guaranteed, and State Street does not assume any responsibility for its accuracy, efficacy or use. Any information provided herein and obtained by State Street from third parties has not been reviewed for accuracy. In addition, forecasts, projections, or other forward-looking statements or information, whether by State Street or third parties, are not guarantees of future results or future performance, are inherently uncertain, are based on assumptions that, at the time, are difficult to predict, and involve a number of risks and uncertainties. Actual outcomes and results may differ materially from what is expressed herein. The information presented herein may or may not produce results beneficial to you. State Street does not undertake and is under no obligation to update or keep current the information or opinions contained in this communication.
To the fullest extent permitted by law, this information is provided “as-is” at your sole risk and neither State Street nor any of its affiliates or third party providers makes any guarantee, representation, or warranty of any kind regarding such information, including, without limitation, any representation that any investment, security or other property is suitable for you or for others or that any materials presented herein will achieve the results intended. State Street and its affiliates and third-party providers disclaim any warranty and all liability, whether arising in contract, tort or otherwise, for any losses, liabilities, damages, expenses or costs, either direct, indirect, consequential, special or punitive, arising from or in connection with your access to and / or use of the information herein. Neither State Street nor any of its affiliates or third-party providers shall have any liability, monetary or otherwise, to you or any other person or entity in the event the information presented herein produces incorrect, invalid or detrimental results.
To learn how State Street looks after your personal data, visit: https://www.statestreet.com/utility/privacy-notice.html. Our Privacy Statement provides important information about how we manage personal information.
No permission is granted to reprint, sell, copy, distribute, or modify any material herein, in any form or by any means without the prior written consent of State Street.