Mutual fund assets in Asia (ex-Japan) will rise to US$495 billion by 2006, according to fund analysts and consultants Cerulli Associates. This implies a 14 per cent a year compound growth rate from the level of US$252 billion at the end of last year, and would make Asia one of the fastest growing retail asset management markets in the world.
Cerulli expects banks, which already dominate distribution in the region, to strengthen their hold from a 39 per cent market share last year to 51 per cent by 2006. By then, Cerulli expects banks to manage 82 percent of mutual fund assets under management in Hong Kong (up from 71 per cent in 2001) and 68 percent in Singapore (2001: 61 per cent). Banks as a sales channel will account for US$131 billion in Hong Kong, Singapore, Taiwan and Korea by 2006, up from US$45 billion in 2001-a compound annual growth rate of 25 per cent.
Citibank has emerged as the top-distributing bank in the region, according to Cerulli’s survey of asset managers in Hong Kong, Singapore, Taiwan and Korea. It was also ranked in the top three in Hong Kong, Singapore and Taiwan and fourth in Korea. Standard Chartered Bank and HSBC were the other top regional distributing banks, according to the survey. These rankings were derived from assets under management as at the end of 2001, as raised by the distributing banks.
Cerulli forecasts that retail assets under management in mainland China will grow from US$10.3 billion at end-2001 to US$37.6 billion in 2006-a compound annual growth rate of 29 per cent, making it the third- largest-and fastest-growing-retail asset management marketplace in the region. Currently, closed-ended funds dominate the Chinese mutual fund marketplace. However, by 2006, open-ended funds will account for 55 per cent of assets under management, say the consultancy. Banks already dominate the sale of open-ended funds in China, and while brokerage firms are now allowed to sell these funds, Cerulli forecasts that banks will continue to account for the bulk of mutual fund sales and assets under management.
Cerulli’s prognosis for banks distributing mutual funds in Asia is good. However, they are likely to face competitive pressures, both from within their own industry as well as from external sources. The insurance industry is likely to pose a significant threat to the bank’s dominance in some markets. Internally, banks need to focus on upgrading their sales process – a criticism across the region from asset management firms. In some markets like Singapore and Taiwan, banks could face some competitive pressure from online platform-based distribution and independent financial advisors (IFAs), though this is not likely to be as serious as the threat from the insurers.
The full analysis can be found in Targeted Perspective-Asian Bank Distribution report, which draws on six months of research on the Asian asset management markets.