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Managers should seek opportunities in untapped business segments amid market fluctuations
June 2020, SINGAPORE—Managers should consider tapping into product trends and exploring new target segments—such as the high-net-worth and retirement segments—amid volatile market conditions and investors’ changing appetites, as managers and fund distributors seek to review their strategies to achieve long-term profitable growth, according to Cerulli Associates’ newly released report, Asian Distribution Dynamics 2020: Gaining the Competitive Edge.
Fixed-income funds dominated inflows in most markets for 2019, and are expected to see continued traction in 2020 due to the market volatility brought about by the coronavirus outbreak. Managers need to keep in mind investors’ shifting appetites and product preferences for their product promotion plans. Thematic funds–such as technology and healthcare themed funds–have also drawn considerable interest from investors. For instance, managers in Taiwan and Korea foresee greater interest in 5G mobile telecommunications in the coming years.
Cerulli’s research provides insights on top fund strategies that managers are most likely to promote to distributors across local markets.
“As investors navigate the coronavirus-triggered uncertainty, capital protection, reducing downside risks, and ensuring steady income will likely be top of mind. Low-risk and high-quality fixed-income products and multi-asset funds could take priority in managers’ product promotion plans in the region. As and when risk appetites improve, managers could likely position Chinese equities, Asian equities, balanced, or long-term themes such as healthcare and technology. Notably, interest is also building in offering sustainability-themed products,” said Leena Dagade, an associate director at Cerulli.
With rising aging populations seen in many countries across Asia, the need for robust retirement solutions becomes more apparent. Fund management opportunities lie within more lucrative markets, like Taiwan, Korea, and China, even as insurance products continue to be the preferred choices for retirement planning among Asian investors. Developments such as pension reforms in Taiwan, and the growing popularity of target-date funds in Korea, have contributed to some advancements seen in certain retail retirement sectors.
Additionally, the high-net worth (HNW) segment remains a promising area for asset managers to target, on the back of a growing population of HNW investors in Asia. Private banks across Asia have seen sizable growth in their discretionary portfolio management (DPM) businesses as they place greater focus on gathering DPM inflows to reduce their dependence on transaction-driven income and build a more robust revenue model that will be relevant in all market cycles. Even though DPM assets do not currently take up a huge proportion of private banks’ assets, it looks to be one of their key growth areas.
“Despite intensified competition faced from managers offering exotic investment strategies, some growth opportunities–like the demand for alternatives, interest in thematic investing, popularity of fixed maturity plans, and growth in private banks’ DPM businesses—present long-term potential for managers,” said Radiance Ang Huey Li, an analyst at Cerulli.
Managers will have to prioritize their selected markets and investor segments by taking into account the unique characteristics of local markets, and develop the right product positioning to meet investors’ changing needs amid the coronavirus-led uncertainty.
NOTES TO EDITORS:
These findings and more are from The Cerulli Report—Asian Distribution Dynamics 2020: Gaining the Competitive Edge. In its 19th 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 distribution and product trends, digital marketing and sales strategies used in the region, and opportunities in the HNW and retirement segments.
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