Corner Office Views | Q2 2023
Fund Distribution in Southeast Asia
Distribution digitalization expands retail fund reach
- To capitalize on the distribution opportunities in Southeast Asia, fund managers will need to differentiate themselves through strong and diverse channels, innovative product offerings, and marketing strategies that are tailored to individual target markets.
- Fund houses themselves are growing their own online channels and some expect digital distribution to increase its share of AUM to pose strong competition to the banking channel.
- Moving forward, mobile apps could become a game-changer in mutual fund sales as more and more Southeast Asian customers do their purchases and transactions via mobile devices.
Justin covers the retail and institutional research for Southeast Asia asset management industry. He leads Cerulli’s annual Asset Management in Southeast Asia report and provides quantitative analysis support for all Asian reports. He also contributes to The Cerulli Edge series. Prior to Cerulli, Justin worked with the Intermediary Business Development team at Nikko Asset Management supporting fund sales and distribution.
Full biography here.
Overall, the retail mutual fund markets of Southeast Asia ex-Singapore present significant opportunities for fund managers, thanks to favorable economic outlooks, supportive regulatory environments, demographics, and technology advancements that create new avenues to distribute funds and reach more investors. However, the region is becoming increasingly competitive as more products come to the markets, including crypto assets and heavily marketed investment-linked insurance plans, which are particularly popular in Indonesia and the Philippines.
Also, much still needs to be done to change Southeast Asians’ savings mentality into an investment mindset. To make some headway, fund managers will need to differentiate themselves through strong and diverse distribution channels, innovative product offerings, and marketing strategies that are tailored to individual target markets.
Distribution continues to diversify
With the digitalization of sales and distribution gaining speed, the reach of retail funds is expanding. This is easing access to products and could bring down costs to both fund houses and investors. Banks are stepping up their digital distribution to make products including funds more accessible via mobile apps, and third-party distribution platforms continue to expand—from digital brokerages and fintech firms to business-to-consumer platforms. Indonesia’s Tokopedia, for example, saw its number of mutual fund users increase 150% year-on-year in June 2022.
The e-commerce platform works with Manulife Asset Management for conventional fixed-income funds and Bahana TCW for Shariah-compliant fixed-income products. The conventional Manulife State Bond II (MONI) Class D1 and Shariah-compliant Bahana MES Shariah Class A fixed-income funds invest at least 80% of their net asset value in debt securities and require a minimum investment of IDR10,000 (US$0.60).
Tokopedia also offers money market funds, including Mandiri Extra Shariah Money Market and Syailendra Dana Kas. These funds also require a minimum of IDR10,000 and invest 100% in money market instruments.
Among banks, Bank Muamalat launched Indonesia’s first online-based Shariah mutual fund counter in May 2022, through which investors can buy, sell, and monitor funds. The bank says average investment product sales have grown 160% annually over the past four years. It partnered with digital platform FUNDTastic as a mutual fund sales agent—as well as Bahana TCW and Eastspring Indonesia as investment managers—on the Shariah mutual fund counter.
In the Philippines, brokerage firm Rampver Financial has launched a beta version of its online platform for mutual fund investments. Wealth management platform Seedbox likewise raised US$6 million to support its growth and can be expected to expand its product suite, which currently includes unit investment trust funds as well as Personal Equity and Retirement Account offerings. Popular payment platform GCash has also made it easier to buy mutual funds through its GFunds marketplace, which allows account holders to invest as little as PHP50 (US$0.90).
Fund houses growing online channels
Fund houses themselves are growing their own online channels and some expect digital distribution to increase its share of AUM to pose strong competition to the banking channel. A Thai manager Cerulli recently spoke with now generates more than 70% of new transactions through its proprietary online application, just two years after rolling it out. Notably, it is not only mass investors that use the fund house’s digital platform, but also high-net-worth clients, who are served by investment managers.
Fund managers in Thailand embraced digital platforms early on, enabling them to start reaping the benefits of this channel. Third-party platforms such as Ascend Wealth, FINNOMENA, and Robowealth now have established rosters of partner local fund houses. In 2022, for example, Robowealth and Schroders launched a new multi-asset portfolio of Thailand-domiciled funds as part of their strategic partnership announced in 2021.
In Malaysia, new investment platforms are still being rolled out—adding to several existing ones. E-wallet operator Touch ‘n Go Group, for example, launched a digital platform, GOinvest, in 2022 to sell mutual fund products, starting with Principal Asset Management’s Principal Islamic Money Market Fund. In March 2023, Islamic fintech firm Saturna also launched a digital investment platform to distribute its two local Shariah-compliant equity trust funds, promising zero sales and redemption charges.
Vietnam is also seeing the entry of investment apps, such as Infina and Anfin, which were both launched in 2021 and target Gen Z and millennial investors. Older player Finhay reportedly attracted more than 2.7 million registered users, highlighting digital platforms’ potential for fund distribution in this market.
Mutual fund sales
Aside from stocks, deposits, and other financial products, these platforms also offer mutual funds. Infina, for example, distributes open-end funds from Dragon Capital, Viet Capital Asset Management, and Mirae Asset. Mutual fund investment starts at VND100,000 (US$4.00). Finhay has a smaller minimum required investment of VND50,000 and distributes more than 10 local retail funds from several fund houses—including bond funds, equity funds, and ETFs. Unlike Infina and Finhay, which have more diverse options, Anfin only distributes ETFs in terms of funds.
Moving forward, mobile apps could become a game-changer in mutual fund sales as more and more Southeast Asian customers do their purchases and transactions via mobile devices. Research by Insider Intelligence estimated that the number of smart phone users in the regions would reach more than 326 million in 2022—with a penetration rate as high as 98.8% in Thailand. This suggests that there is significant potential for mobile transactions to increase, including fund trading.
It also points to the opportunities to shift marketing to mobile platforms. While the COVID-19 pandemic accelerated digital marketing at many fund houses and distributors, some of the approaches of the past over two years are no longer that effective, now that in-person activities have mostly gone back to normal. Webinars for investors, for example, may no longer be as popular as they were when people were caught in lockdowns. Hybrid events might be more successful at engaging investors right now. Digestible content in the form of short videos can also be effective when targeting Southeast Asia’s younger investors. Likewise, social media strategies continue to be relevant, including in distributing engaging content.
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