Asian Managers to Focus on Ramping Up Digital Business While Controlling Costs
June 24, 2021 — Singapore
Embracing megatrend investment ideas and tapping wealth pools are key to business sustainability
As Asia ex-Japan managers transition 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. These are some of the findings from Cerulli Associates’ newly released report, Asian Distribution Dynamics 2021: Navigating the Post-Pandemic Landscape.
Cerulli’s survey findings show Asia ex-Japan fund managers had to adopt or step up their adoption of digital channels in 2020, and many are planning to do the same in 2021. Most managers in the region placed the highest priority on marketing and sales efforts, ensuring robust liquidity risk management, and investing in digital platforms.
Cost has also been in the spotlight, as uncertainty in growth has prodded fund managers to seek ways to manage operating costs more effectively. In a Cerulli survey, managers ranked reducing their operating costs as their fourth most important priority to ease the impact of COVID-19. Fund managers are stepping up investments in technology to create more efficiencies while supporting their investment processes.
Whether it is through their own platforms or their distribution partners’, fund managers in China have been creatively engaging with and marketing to investors. 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.
Apart from those in China and India, online platforms in markets such as Korea and Taiwan benefitted from COVID-19 in 2020, as retail investors turned to contactless channels to invest and prefer the convenience and low minimum investment amounts offered by such platforms. In Singapore and Hong Kong, competition to onboard funds or expand distribution through global and private banks is expected, even as managers vie for opportunities emerging from online platforms.
One trend in 2020 that could have long-term ramifications for the fund industry was the acceleration in the uptake of exchange-traded funds (ETFs), led by markets such as 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.
Driving this trend was 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.
“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. “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.”
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Note to editors
These findings and more are from The Cerulli Report—Asian Distribution Dynamics 2021: Navigating the Post-Pandemic Landscape. In its 20th iteration, this annual report sizes and identifies opportunities and challenges in Asia ex-Japan’s six key markets—China, Hong Kong, India, Korea, Singapore, and Taiwan. It provides insights into product trends, fees and distribution practices, investment trends in the HNW segment, developments in sustainable investment products, and managers’ business strategies.