Searching for inspiration
If ever you wanted evidence of the fragmented nature of Asia’s markets, leaf through this edition of AsianInvestor. You’ll see the asset management industries of China, Japan and Korea each moving at differing speeds, at different stages of their own cycles and subject to different drivers.
But if there’s one thing that unites them to a common cause, it’s the low penetration of long-term solutions for individual investors. It’s the key to unlocking the region, and it’s elusive.
Chinese fund firms have long struggled to achieve sustainable business growth, partly a reflection of product limitations imposed by regulators, and partly limp demand. But liberalisations onshore have unleashed an explosion of financial market activity. Now four in five fund houses have set up a segregated account subsidiary to expand their scope of business, leading assets to quadruple in that line of business last year alone. But there is a sinister element to this. Intended to provide long-term alternative asset classes to investors, what has actually happened is it has opened a new, easy route for banks to offload assets. Very noticeably, the biggest beneficiaries of this growth are subsidiaries affiliated with banks (see page 26). Industry growth seems certain to slow.
Now take Japan, which has endured two decades of deflation. Its asset management industry has similarly struggled for growth, with investment trusts making up less than 4% of household financial assets. Evidently holding cash was preferable in a deflationary environment, but Abenomics has changed all that. A run-up in the local stock market for the last two years has given fresh impetus to the nation’s ETF market (see page 40), while a concerted drive to instill a culture of improved corporate governance looks set to underpin the market’s investiblity both at home and abroad. Certainly economists, commentators and investors in Tokyo are displaying an optimism not seen there for twenty years (see page 18). Conditions are ripe for industry growth.
And lastly to Korea, which more than any other nation has reason to feel aggrieved by Abe’s systematic devaluation of the yen. Last year was tough for Korean managers, a reflection of a flat-lining Kospi and low yields. Many companies in Seoul have responded to the conditions by rightsizing their businesses. But what this has driven is an innovative zeal to find new ways to make money. It is a market where differentiation is segregating the winners (see page 46). Industry growth is there for the insightful.
Asian managers could do worse than to look for inspiration from the late Lee Kuan Yew, who epitomised the single-mindedness needed to transform a fractious and poor island within Malaya into a rich and stable nation (see page 64). Emulate his success with Singapore, and their future would seem assured.
04 On the move
Invesco hires Lindsay Wright for institutional growth; David Wong takes reins at MPFA; Patrice Conxicoeur to head Japan with HSBC
08 Regulatory Analysis
Industry praises retired Alexa Lam for landmark cross-border initiatives, but there is criticism, too
09 Regulatory Roundup
Shanghai launches first 10-year bond futures; Hong Kong’s SFC sets dual-shares framework; Asean regulators sign fundraising framework
10 Data Centre
New report provides landscape analysis of social and environmental impact investing in six countries across South Asia
12 Asset Owners
Smart beta offers asset owners more control over their risk budget, but there are provisos
16 Q&A: Toon Krooswijk, FWD Group
18 AsianInvestor’s fourth annual Japan Institutional Investment Forum
20 HK Future Fund urged to allocate to alternatives; NZ Super faces criticism; Temasek responds to StanChart shake-up
Q&A: Balancing eating and sleeping
Paul Stefansson, head of distribution for Asia-Pacific, UBS Wealth Management
24 Li Keqiang prioritises private banking; mutual recognition takes shape; ARFP edges closer
26 Fund Managers
Boom or Bust?
China’s explosion of segregated account subsidiaries appears to have saved mutual fund companies, but it is creating a new set of risks
30 Roundtable: Experts debate whether the Hong Kong dollar bond market can differentiate
36 Why European high-yield bond managers have most to fear in 2015
40 Domestic drivers suggest Japan’s ETF market is ready for resurgence
46 Fourth annual Korea awards: innovation unites the winners
52 HK closes in on default fund; five foreign firms granted new QDLP quota; Amundi enters Asia ETFs
54 Alternative Investments
Asia’s hedge frogs
The third in a series of articles celebrating AsianInvestor’s 15th anniversary assesses the evolution of hedge funds in Asia
56 Q&A Tim Wong, executive chairman of
58 Asset Services
Creating a follow-the-sun operating model
Interview with Joe Prsa, COO of QBE’s investment arm
62 HSBC targets China custody; Vontobel joins network race; Stock Connect short-selling slated, Shenzhen link close
63 Trader talk: Kent Rossiter, Allianz Global Investors
The Singapore Story The life of Lee Kuan Yew and how he shaped Singapore with a singular vision for a city-state