As the COVID-19 pandemic continued for a second year, assets under management in Asia grew 15.9% in the first nine months of 2021, an improvement over the 11.0% increase recorded in the corresponding period of 2020. This was led by China’s 20.2%, followed closely by Singapore at 19.5%, and India at 16.0%.

China’s asset management industry is expected to continue registering sound growth in the long run, driven by the nation’s economic transition to high-end and green manufacturing, an increasingly diversified product and distribution landscape, and further foreign capital relaxation on business ownership. In Singapore, the central bank is stepping up efforts to channel capital to environmentally friendly projects, while enhancing fund domiciliation opportunities. In India, product innovation is expected to continue in global investments and sustainable themes, offering global managers product partnership opportunities with local fund houses.

Environmental, social, and governance (ESG) investing continues to gain traction throughout the Asia-Pacific region, along with increasing commitments to net zero emissions and decarbonization. Superannuation funds in Australia are pushing for stronger ESG practices among their investees, driven by members’ demands and supported by a wider industry push. Managers in Malaysia have been integrating both ESG and Shariah principles into single funds; the number of qualified sustainable and responsible investment funds has tripled since 2020. In Hong Kong, global managers have actively launched sustainability-themed products for accredited investors in recent years. Regulators and associations are also making more concrete efforts to introduce standardized disclosures, especially in the areas of climate change and carbon transition.

Apart from ESG, other emerging themes spell growth opportunities. Retirement in China is a lucrative market, especially with a new pension system providing tax incentives for eligible mutual funds and bank-issued wealth management products in the pipeline. Passive investing in India has come under the limelight—the range of exchange-traded funds (ETFs) have broadened to include healthcare and consumption-based ETFs, among others, and silver ETFs could join the line-up in 2022 following the release of regulatory norms last November. In Korea, given the hunt for yield in the prolonged low-interest-rate environment, the shift from fixed income to alternatives is expected to continue among asset owners. However, regulatory curbs and a shortage of internal expertise mean that traditional asset mandates remain important.

“Investors are likely to stay conservative in 2022 amid prevailing market uncertainties,” said Ken Yap, managing director, Asia, at Cerulli Associates. “However, the development of emerging themes, including ESG and passive investing, and continued regulatory support across various markets indicate a positive outlook for Asia’s mutual fund industry.”