Global Asset Managers Expanding in Asia Need Realistic Goals, Says Report
Investment management firms that expand into Asian countries outside Japan and Australia should do so with realistic goals that recognise both the limitations on short-term growth potential in the region and the many operational hurdles that will keep profit margins thinner than those achieved in western markets.
A new report from Greenwich Associates notes that, although asset management organisations have several compelling reasons to build a presence in Asia, firms that take on the challenge should temper their expectations:
“In our dealings with global investment management firms, we often detect a disconnect between senior leadership in the home office and the personnel on the ground in Asia,” said Greenwich Associates consultant Abhi Shroff. “Back in Europe or the US, the Asian market represents a growth opportunity that is frequently given prominent play in the organisation’s overall long-term strategy. In the Asian office, however, the reality of the business is defined by limited prospects and day-to-day operational challenges.”
Benchmarks for Managers
The new Greenwich report, entitled ‘Global Asset Managers in Asia: Setting Realistic Expectations’, contains a series of benchmarks intended to help investment managers accurately assess the business opportunities and economic challenges of the Asian market. The data presented in the report is based on research conducted with 16 global asset management firms currently doing business in Asia. Together, these firms manage US$260bn in Asia – or roughly one-third of all outsourced institutional assets within the Asian region.
Almost all the managers participating in the study reported that strong markets had resulted in a growth in assets sourced from Asia in calendar year 2009, with most managers reporting growth of 20-60% in Asia. A majority of managers expect Asian assets to grow in calendar year 2010 as well. Thirteen of 15 global asset managers competing in Asia expect to hire additional client-facing staff in 2010, with most managers planning to bring on board one to three professionals for their institutional business. Fourteen out of 15 managers see the biggest business opportunities emerging in China, with South Korea and Taiwan also seen as strong potential sources of new business.
Global asset managers are following similar strategies in their efforts to expand their Asian businesses: They are focusing on top-tier institutions including central banks, other sizable government funds and large pension funds. “As a result, although there is less competition for institutional assets overall in Asia than there is in western markets, the competition for mandates from these important institutions can be fierce,” said Shroff.