APAC 2024: Where should you be focusing your efforts?

By: Mark McFee

08/01/2024

The Asia-Pacific (APAC) region is undergoing significant economic expansion, making its investors a core target for global asset managers. Private wealth has increased dramatically, with APAC’s high-net-worth-investor (HNWI) population now challenging the US for top spot across the globe.

Retirement investing is another area where there is the potential to expand, with several APAC economies, such as Japan, China, Singapore, Hong Kong, and Australia, amongst the most rapidly aging economies in the world. For asset managers, the opportunities in APAC markets are potentially enormous.

With the spotlight firmly on the region, and in anticipation of the launch of our APAC Fund Selector Study (APAC FSS), we recently carried out a brief qualitative survey of 15 fund selectors from Australia, Hong Kong and Singapore. On review, there are some clear challenges, opportunities, and general themes that asset managers should consider when doing business here. We discovered the following:

1. China’s economic performance, global market volatility, and geopolitical issues are driving a risk-off environment.
2. Low-risk products, ETFs, fixed income, access to private markets and even cash are most appealing at present.
3. Local/regional product providers are popular, but there are clearly some global brands that have managed to get cut-through into the region.
4. Offering products suitable for the current market conditions is essential.
5. Trust, commitment, accessibility and service are critical brand factors that drive investment.
6. Performance vs cost is frequently mentioned as a business consideration.
7. Although ESG requirements and appetite clearly vary by region, client awareness has generally increased.

ESG across the region

With the last point in mind, and since it has been embraced by investors globally, let’s take a closer look at the state of selector thinking on ESG across the region.

We begin in Australia with mixed views. Clients are generally more informed about ESG as a concept and it is becoming increasingly important; however, underperformance has also had an impact and there is a lack of suitable products available.

In Singapore we found that general interest in sustainable investing is not particularly positive due to recent underperformance. Current investment appetite is focused on risk mitigation and positive returns. ESG performance is not meeting those requirements. There are also some trust concerns around data and reporting. In conclusion, sustainable investing in Singapore will not be a strong consideration until the economic future becomes clearer.

“ESG will always be on the radar due to climate change. But when the economy is struggling, ESG doesn’t feature as strongly as it might have when markets were booming.” SGP panellist

Hong Kong is perceived by local selectors as lagging behind other markets in respect of ESG uptake. Inconsistent definitions and reporting processes make it difficult to assess ESG funds. There is a general belief that the market will get there, supported by the Government commitment that Hong Kong will strive to achieve carbon neutrality before 2050, but more data is needed to facilitate fund selection.

“Domestically we’re seeing a big push from the local regulators to incorporate the concept of ESG into how businesses ought to govern themselves. And by default, then, these businesses also need to disclose their ESG practises, so more related data is becoming accessible to us.” HK panellist.

In summary, it appears that ESG is not an easy sell in the current APAC investment environment – advisers seem to be looking towards more low-risk funds or those that are delivering immediate positive returns. There is low client demand and trust/greenwashing is an issue. However, there is scope for improvement and clearly an optimism that, given time and the introduction of ambitious sustainability targets and regulatory frameworks, it could become as prevalent as it is across Europe.

How can Research in Finance help?

APAC FSS is an annual study designed to help asset managers track brand resonance, competitor position and investment trends at both APAC and individual market levels. It spans a total of 300 retail fund selectors across five major markets: Australia, Hong Kong, Taiwan, Singapore, Japan.

The study will give marketeers, distribution heads and sales teams a focused look at your brand across Asia Pacific:

• Benchmarking – The asset managers held in highest regard and where your company sits amongst its peers.
• Brand Identity – A deep dive into brand perception, communication and engagement: who’s getting it right and what is proving most successful.
• Asset Manager Choice – What drives asset manager choice?
• Market Drivers – Market sentiment, asset-allocation intentions, distribution trends and perceived leaders across asset classes.

Research in Finance closely monitors participation, ensuring a high-quality sample of fund selectors in each market:

• Retail banks, private banks, advisory/wealth management firms, family offices and funds of funds all included.
• A powerful mix of client-facing individuals and those focused on central fund research/selection.
• Target participant numbers per market consider market AUM size and specific fund distribution dynamics.

If you would like to know more about the APAC Fund Selector Study, please contact Mick Hrabe, Toby Finden-Crofts or Richard Ley. Options exist to become a full syndicate member for the next wave and/or access to specific country data.