As Asia ex-Japan fund managers adjust to the post-pandemic period, they will need to ramp up or create improved digital business models while making their operations nimble and cost-effective to capture the emerging opportunities and wealth pools in the region, according to Cerulli Associates, a Boston-based consultancy.
Its recent survey found that most managers in the region placed the highest priority on marketing and sales efforts, ensuring robust liquidity risk management, and investing in digital platforms.
“Increased competition, use of online platforms, and the gradual rise of passives are expected to fuel fee pressures and weigh adversely on managers’ margins over the medium to long term,” said Leena Dagade, an associate director at Cerulli Associates.
Fund managers are stepping up investments in technology to create more efficiencies while supporting their investment processes.
For instance, fund managers in mainland China have been quick to adopt digital technologies to communicate with their customers, whether through their own platforms or their distribution partners’.
In markets such as Singapore and Hong Kong, managers have reallocated budgets to digital marketing, hosting webinars, creating green-screen studios for more professional videography, and conducting social media campaigns and promotions, according to the Cerulli report, called “Asian Distribution Dynamics 2021: Navigating the Post-Pandemic Landscape”.
In both markets, competition to onboard funds or expand distribution through global and private banks is expected, even as managers vie for opportunities emerging from online platforms.
Meanwhile, online platforms in Korea and Taiwan were boosted by Covid-19 in 2020, as retail investors turned to contactless channels to invest, and were further seduced by the convenience and low minimum investment amounts they provided.
Lower cost options
Cost has been in the spotlight too, as uncertainty about growth has prompted fund managers to find ways to manage operating costs better. Managers ranked reducing their operating costs as their fourth most important priority to ease the effects of Covid-19.
“While delivering consistent performance is important to retain investors, managers are also likely to focus on curtailing operating expenses and improving their product mix to include megatrend investment themes and higher revenue-generating products, such as alternatives, and targeting wealthy investors for revenue growth,” said Dagade.
They also face competition, according to Cerulli.
One trend in 2020 that could have long-term ramifications for the fund industry was the acceleration in the uptake ETF, led by Singapore, China, and India. Singapore saw the highest on-year growth, with an 84.6% rise in locally domiciled ETFs. India and China saw ETF asset growth of 47.6% and 44.0% on-year, respectively.
Clearly, there is a preference for transparency, simplicity, and lower investing costs.
“The fact that many ETF investors in the region are young bodes well for ETF managers. If engaged well, they could become long-term investors and may diversify their investments to include other asset classes,” said Kean Yung Siau, an analyst at Cerulli.