Southeast Asian Managers Seek Growth Through Product Innovation and New Distribution Channels

June 15, 2022 — Singapore

Managers are prioritizing the rollout of innovative products over the next three years, focusing on global equity, sustainable, and alternative strategies, among others

Launching new innovative products and establishing new distribution channels emerged as the top two strategic priorities for asset managers seeking growth in their businesses in the Southeast Asia ex-Singapore region over the next one to three years, according to Cerulli Associates’ newly released report, Asset Management in Southeast Asia 2022: Building a Sustainable Growth Pathway.

The report findings show that fund managers consider launching innovative products as their most important business strategy in 2022 and in the next three years. Many are focusing on global equity and fixed income; environmental, social, and governance; alternatives; and China equity for their product partnership strategies in the region. Partnerships through subadvisory arrangements (50%) were the ranked highest.

Next-generation and disruptive technology sectors are likely to continue offering growth opportunities, especially in a region that is a hotbed of digital adoption. Meanwhile, more funds with the “sustainable” tag are expected to be launched in the region, especially those focused on global asset classes.

Over the past year, the region has seen not only greater diversity of fund categories but also larger offshore fund investments. The rising share of the region’s foreign-invested fund assets indicates a growing realization among investors of the need to diversify beyond their local markets. Thailand has the highest percentage of foreign-invested mutual funds and is home to the top five feeder fund managers in Southeast Asia ex-Singapore. The country had 28.9%—or US$36.9 billion—of its total mutual fund assets invested in foreign funds at the end of 2021.

Establishing new distribution channels in 2022 and over the next three years ranks second highest on Southeast Asia ex-Singapore managers’ agendas, just after launching new innovative products. Digital channels such as fintech platforms and robo-advisors are set to grow their clout over the longer term. 41% of fund houses expect assets under management raised via online channels to overtake those of traditional channels over the next decade.

“Going beyond traditional channels to diversify sales channels is the way forward. This is perhaps the most important reason to tap into digitalization,” said Shannen Wong, a senior analyst at Cerulli. “While unlikely to be a big AUM puller, managers believe that creating alternative distribution channels is an important step in serving their clients and growing retail assets. Otherwise, they risk losing out to competitors.”

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