Asia’s mutual fund assets under management (AUM) in the first nine months of 2022 were mostly unchanged from the level in 2021, weighed down by sticky inflation, rising interest rates, and risk-averse sentiments. Assets fell by 0.2% in the first nine months of 2022 to a total of US$5.3 trillion, compared to double-digit growth in the same corresponding periods during the pandemic years of 2021 and 2020.¹

Among Asian markets, China recorded the highest growth rate of 4.6% during the nine-month period, a time of harsh zero-COVID restrictions. Most other markets contracted, except India, which saw a marginal increase of 0.1% in assets. Hong Kong and Singapore shrank the most, by 23.1% and 24.3%, respectively.

In the third quarter of 2022 alone, growth was -0.6% compared to the 2.8% increase in the corresponding period in 2021. India outperformed with a 7.1% rise in AUM, accounting for 7.7% of the Asian market.

Significant opportunities are ripe for the picking amid market movements. In China, growth in bank wealth management accelerated in 2022 following the super guidance. Private pensions are also likely to become a lucrative blue-ocean market, according to Cerulli’s research. Brokerages in Japan are eyeing managed account programs to penetrate the fee-based business and to stay in line with the regulator’s emphasis on long-term investments.

Regulations in both Hong Kong and Singapore support a positive outlook for the development of family offices; digital assets; and environmental, social, and governance (ESG) investments. Appetite for sustainable investing also remains strong in Japan and Taiwan.

In a period of interest rate hikes and market uncertainty, multi-asset funds and bond exchange-traded funds (ETFs) have become safe havens for many investors. In Australia, balanced funds received the most inflows in the year to September, far ahead of other asset classes. In Singapore, net inflows into mixed funds were mainly driven by moderate allocation funds, while fixed income, battered by the rise in interest rates, saw net outflows in the third quarter.

Even as equities suffered from overall market volatility, certain segments performed well. In Australia, outflows from equity funds were moderated by its lack of a significant tech sector, while in Japan, foreign equity funds investing in U.S. companies with growth potential have been popular and are expected to remain among the key products in 2023. In Taiwan, equity ETFs have continued to attract investors, thanks to their diversified stock selections.

“Clearly, there are opportunities available for both investors and asset managers regardless of the market situation in the months ahead,” said Ken Yap, managing director, Asia, at Cerulli Associates. “Long-term themes such as ESG and retirement are expected to be in demand, and regulatory support across various markets will underpin continued growth and resilience in Asia’s mutual funds industry.”

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¹ Source: Morningstar