Income Rules Over New Ideas
Though new product concepts are emerging, income remains a top priority for Asian investors

June 2018, Singapore. Even as managers seek to diversify their product offerings with new theme-based funds, they see investors continuing to favor income-oriented funds in 2018, finds Cerulli Associates, a global research and consulting firm.

This was indicated in the findings of Cerulli’s survey of asset managers regarding their product promotion plans. Managers selected regular and steady income payments as the top product feature appealing to investors, similar to last year.

Although markets recovered in 2017 compared to 2016, income-oriented products continued to be popular among Asian investors. Bond funds, for example, were the top net drivers of inflows in Singapore, Hong Kong, and Taiwan in 2017.

Inflows have not trickled into equity funds as much as the market has expected—at least in the early part of 2018—except in India. Still, managers across the region have put high priority on promoting equity funds, possibly to improve their revenues amid the sale of low-fee earning products over the last couple of years.

The trend toward income-oriented products seems likely to continue amid market volatility, as managers and distributors mentioned that their product promotion agendas are aligned to investors’ preference for these. Multiasset funds could be in the limelight this year as global markets take cues from various events, including U.S. interest rate hikes and rising trade concerns. Managers have indicated a strong inclination to promote multi-asset and fixed-income funds, and in particular, Asian high-yield funds.

Asset managers are likely to differentiate their multi-asset products to overcome the existing saturation there, and meet investors’ income needs. Notably, balanced funds staged a comeback, with net inflows in 2017 as compared to net outflows in 2016. Excluding China and Korea, India observed the strongest inflows to balanced assets among regional markets. Early trends this year also look supportive of the product category.

In addition, managers have begun to incorporate new and developing themes, such as artificial intelligence, sustainability, and smart beta, into their product offerings. While it is still too early to determine the performance of, or demand for, such theme-based funds, and whether they address investors’ immediate needs, it is clear that managers are pursuing these products, which could potentially deliver alpha over the longer term.

These findings and more are from The Cerulli Edge—Asian Monthly Product Trends Edition, June 2018 issue.

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