A growing number of money managers are gearing up to pursue institutional clients in Asia. Still, industry veterans warn that reaping dividends from the region's stellar growth will require a long-term commitment.
Asia's retail market remains an attraction, but money management firms will increasingly be focused on institutional opportunities in the region, Sze Yoon Ng, a London-based associate director with Cerulli Associates, Boston, said in a telephone interview.
In a July 12 report, Cerulli predicted money managers would see their assets under management grow faster in the Asia ex-Japan region than in other major markets. Cerulli said institutional assets for which money managers can compete in the region will grow to $1.74 trillion by the end of 2016, up 40% from $1.1 trillion at the end of 2012.
The region's prospects haven't gone unnoticed. On July 9, KPMG LLP, announcing the results of the firm's annual investment management business outlook survey, found 28% of the more than 100 senior U.S. asset management industry executives surveyed identified Asia-Pacific as “the most promising region for asset growth,” second only to the 57% who named the U.S.
The growing number of firms knocking on the limited number of big institutional doors in Asia makes it “a bit challenging to make money,” James Suglia, U.S. advisory sector leader for KPMG's investment management practice in Boston, said in a telephone interview. But amid “megatrends” pointing to Asia's growth prospects, growing numbers of U.S.-based money managers are pursuing expansion in that part of the world “irrespective of whether it's hard to make money (there) today,” he said.
For a number of firms, that anticipated growth in Asia will be coming off of a low base.
A few big U.S. money managers already garner more than 10% of their assets under management from Asia-Pacific investors, including Western Asset Management Co. and State Street Global Advisors, at 14% apiece, and MFS Investment Management Inc., at 11%.
But other heavyweights have yet to approach 10%. Among them: BlackRock Inc., at 8%; J.P. Morgan Asset Management, 7.4%; Pacific Investment Management Co. LLC, 6.9%; and BNY Mellon Asset Management, 6.1%. All numbers are from Marietta, Ga.-based data tracker eVestmentAlliance, as of March 31.
Money managers note that Asia's institutional marketplace has become considerably more interesting over the past decade or so — with the establishment of a number of sovereign wealth funds and the rapid growth of national pension schemes in markets from China to Korea to Malaysia. Those include the $482 billion China Investment Corp., $57 billion Korea Investment Corp. and China's $180 billion Social Security Fund, said Terence Lam, the Hong Kong-based head of sales and marketing, Asia, for AXA Investment Managers.