According to a KPMG report released this week, Asia Pacific (Apac) remains an attractive region for global asset managers with the potential for further growth.
“The growth of AUM in Apac was higher than other regions in the ten years to 2022,” said Chee Hoong Tong, partner, asset management, KPMG China.
“At the same time, a relatively small proportion of investable assets is currently being managed by asset managers, so there is still potential for further development of the industry.”
Apac is a highly diverse region, so asset managers need to understand the different regulatory requirements and consumer behaviour in the various jurisdictions, noted KPMG, in the report “Growing in a Turbulent World- Finding the next growth engine in APAC asset management”.
However, in general, one of the benefits for asset managers in Apac is higher and relatively stable margins. Despite higher cost margins — attributed to high regulatory set-up fees and investment in digital distribution – Apac profitability has consistently outpaced North America, KPMG found.
Also, retail distribution remains mostly in the hands of large intermediaries. Fund products in Hong Kong, Singapore and Mainland China are largely distributed through banks, and across these markets, banks enjoy high penetration rates, strong existing presence, and have established retail distribution networks.
Banks have also leveraged digital channels to deliver comprehensive services, enabling access to a broader market of retail investors. However, wealth platforms are exploring a new business model could be a disruptor in this space.
Mainland China is by far the largest market in terms of AUM. There is a mix of retail and institutional investors, with mutual funds the most dominant product (37.2% of total AUM as of 2021. Long term prospects remain sound, especially relative to mature markets in the West, but short-to-medium term outlook is uncertain, according to KPMG.
Meanwhile, Apac insurers anticipate growth in insurance premium income, but are faced with the challenge of generating returns in a difficult market environment. Apac equity and bond performance declined -19.7% and -4.4% respectively in 2022, for instance.
Insurers in the region predominately manage assets in-house or outsource to intra-group subsidiaries. There are relatively few cases of insurers outsourcing to external asset managers.
Finally, Apac pensions saw higher growth than the global average in the five years to 2022 (around 8% versus 6.5%, respectively), driven by ageing populations and growing workforce contributions.
Defined contribution pensions dominate in most markets in the region. The average outsourcing rates for Apac pensions increased from 30.6% in 2017 to 36.8% in 2021, KPMG found.
