Global fund management companies appear to be cutting costs too aggressively in Asia in respect to regional revenues, according to a study by Greenwich Associates, a research firm.

Abhi Shroff, a consultant at Greenwich in Singapore, says many asset managers are slashing head count and other costs at the same degree as in the United States. But revenue declines in Asia have been less than those in America. So why are many firms cutting Asia-related expenses to the same degree?

"Most asset managers' decisions are driven globally, which means they make cuts across the board," Schroff says. "It seems aggressive, given what these companies are trying to do [in Asia]."

He acknowledges the firm's study of global managers in Asia is not as comprehensive as the one it did on managers in the US. Greenwich recently surveyed 47 firms in the US and 11 in Asia -- most of which were the regional arms of the same companies.

The firm has found managers in Asia averaged a 15% decline in assets under management over 2008, compared to a 27% decline among managers in the US. This in turn has impacted revenues, with average revenue among Asian managers projected to fall 16% from 2007 levels by the end of 2009; US managers' revenues will fall 32%.

In response, about half the managers are reducing expenses in line with revenue falls: but in line with revenue falls in the US, not in Asia.

"Those managers not cutting expenses significantly in Asia may stand to benefit disproportionately from a market rebound," Shroff suggests. The survey results suggest about half the industry will be in such a position.

Firms have cut headcount by 9% on average, with over half the surveyed managers having fired staff. Firms are also freezing salaries and hiring, reducing the highest base salaries, eliminating perks and cutting benefits. The downturn is also an opportunity to get rid of anyone who has under-performed.

Beyond the employee level, the majority of asset managers are slimming their product range and binning the least profitable offerings.

Ironically, the same two areas of business -- executive management and support services -- are where some firms are cutting the most (over 15% budget reductions) or where others are increasing the budget.

The broadest (if not the most severe) budget cuts are to information systems and technology, where 64% of respondents plan to reduce spending.

It's not all about cutting costs. Shroff says the one area that seems to be attracting new budgets is client servicing. "Firms are looking to retain their existing clients," he says. In Asia, client servicing has always played a backseat role to sales, in part because the region is so fragmented that the cost of providing top-notch service is higher. Therefore many Asian institutions or wholesalers were not able to enjoy the same degree of service as found in Europe and America.

This seems to be changing, however, as fund houses realise the need to keep their existing clients happy when drumming up new business is so difficult.

The lesson for fund management executives is to not cut expenses to the bone; and if you must do so, make the cuts in non-client facing functions. While getting rid of under-performing staff and unprofitable products, fund houses should use this opportunity to spend as much time with clients as possible.

But some houses are being forced to cut too much in Asia, because on one-size-fits-all decisions out of America or Europe. Those with the ability to differentiate among regions stand a better chance of winning new business when markets turn.