Local money managers in Asia will benefit as Asian investors come to account for an ever-larger slice of the global wealth pie, but big U.S. and European players could be poised to gain even more.
With greater wealth likely to be accompanied by a growing appetite for offshore investments, the scale those U.S. and European firms can bring to the Asia-Pacific region, together with their experience running multinational businesses, leave them better placed to gain assets for now, observers predict.
Market veterans say mergers and acquisitions might provide a short cut in obtaining global reach for a brave few — mostly China-based firms balancing a focus on fast-growing business opportunities at home with official encouragement to add overseas muscle.
For now, however, many analysts say it's tough to point to a local player in Asia's financial conglomerate-dominated asset management industry that looks set to scale the upper echelons of the global industry in the next five to 10 years.
The story of Asia's asset management industry is one of players with local market expertise struggling to become relevant outside of their home markets, in competition with global firms that have figured out how to run multinational businesses, said Joseph Ngai, a direct-or and managing partner of McKinsey & Co.'s Hong Kong practice, focused on Greater China financial institutions.
The latest Pensions & Investments/Towers Watson ranking of the world's 500 biggest asset managers, in terms of U.S. dollar-denominated assets under management, showed global U.S. and European heavyweights claiming the top 30 spots at year-end 2013.
In a Jan. 22 interview, Daniel Celeghin, Hong Kong-based partner and head of Asia-Pacific with money manager strategic consultant Casey Quirk & Associates, estimated local managers in Asia now oversee roughly US$7.5 trillion of the region's $10 trillion in externally managed assets, well under 15% of an estimated $58 trillion in externally managed assets globally. (All dollar figures in this story are U.S. dollars unless otherwise noted.)
Asked about likely trends, Mr. Celeghin said arguments can be made for the share of Asia-based managers to rise or fall in the future. But with foreign managers better placed to offer asset owners higher-margin strategies, a “safer assertion” is that local managers — absent a move up the risk-reward ladder by those firms — will see their share of money management industry fees decline.
Amid the rising profile of Asian investors, big global managers, with their broader capabilities, are in prime position to serve major institutional investors in the region, agreed Ian Martin, Sydney-based vice chairman, Asia-Pacific, with investment bank Berkshire Capital.
With so many Asia-based managers focused on their local markets, global managers “will get the main benefit from growth in Asia,” said Hwang Sung Taek, CEO and chief investment officer of Truston Asset Management, an independent Seoul-based firm with more than $14 billion in assets under management.
Analysts say that fact should leave the bulk of home-grown firms in the Asia-Pacific region looking to expand beyond their national borders. Local managers in China, where the domestic market's strong prospects make a parochial focus excusable, could be the exception.
Outside of China, the goal of “growing out of your own country is on the minds of everyone,” said McKinsey's Mr. Ngai.