Asia-Pac retail, wealth investors to eclipse sovereign funds as growth engines

Individual assets to hit US$5t by 2018.

As Asia-Pacific economies grow, creating wealthier societies, it's the local retail fund and private banking markets that will generate close to 50% of net new flows and revenue opportunity for money managers over the next five years, according to a new whitepaper from Casey, Quirk & Associates LLC.

By contrast, the sovereign wealth funds and other government entities that controlled the bulk of professionally managed assets to date in the Asia-Pacific region will prove harder to target successfully by investment firms, as they increasingly move to manage assets internally.

The asset allocation mix is also evolving, Casey Quirk said in its report, Evolving Markets: A Practical Framework for Asia-Pacific, with investors adding non-domestic stocks and bonds, alternatives, including real estate, hedge funds, and private equity, and multi-asset class solutions to their portfolios.

Professionally managed investment assets in the Asia-Pacific region will surpass US$14 trillion by yearend 2018 – from US$10 trillion in 2014 – and produce US$66 billion in fee revenue for asset managers worldwide over the next five years. Australia, Japan and Mainland China will represent two-thirds of the total revenue opportunity through 2018, followed by South Korea, Hong Kong, Singapore, Taiwan and India, according to Casey Quirk. Of the US$66 billion total, those eight markets will represent a US$51.4 billion revenue opportunity from manager turnover, while US$10.9 billion is projected to come from net new flows.

"The dynamic growth underway in the region's asset management markets, and shifting buyer investment preferences, will force local managers to play defense on their home turfs while becoming proactive in marketing their Asia-Pacific skills globally," said Daniel Celeghin,¬ Hong Kong-based partner at Casey Quirk and head of Asia-Pacific. "Global asset managers may have the edge currently on managing strategies that are increasingly in demand, but to be successful in the region they will need to adapt their investment and distribution capabilities to fit local needs."