Asia funds enjoy net cash inflows of $69 billion

Strategic Insight research shows Asia-based funds overall had a good, not great year in 2011, in line with the US and in contrast to Europe; but only the top managers benefited.
Asia funds enjoy net cash inflows of $69 billion

Mutual funds domiciled in Asia and Japan received a net cash inflow in 2011 of $69.4 billion, making last year a good, but not great one for the industry as a whole.

However, according to Strategic Insight, which has compiled the data, it remains a winner-takes-all environment in which the top blockbuster funds tend to win most of the assets.

Globally the funds industry took in a net $200 billion last year: it’s positive, but well down from the $1 trillion of net inflows enjoyed in each of the previous two years.

Given the euro crisis, a close shave with an American default, a scarred retail clientele and rising regulatory uncertainty, that’s not a bad result.

Funds in Asia, the US and Latin America enjoyed net inflows, while the industry in Europe lost assets. (See ‘Fund Flows’ in the forthcoming March edition of AsianInvestor magazine for more details about the biggest gainers in 2011.)

At a global level, Strategic Insight says fixed-income products have dominated asset gathering over the past few years, but expects equities to gain renewed traction this year. Over 42% of the $30 trillion in total fund assets are equity products, with another 9% in balanced funds.

Another trend gaining steam is for ‘solutions’-oriented funds, such as multi-asset funds (see our magazine’s March edition cover story), with absolute-return targets.

This is true in Europe and the US (where the biggest gainers for asset-allocation products include the likes of Pimco and First Eagle, and for absolute-return products, Standard Life Investments, Newton and iShares), but less so in Asia: Strategic Insight’s data shows that all types of mixed or balanced funds domiciled in Asia and Japan suffered net outflows in 2011.

Vanguard, Franklin Templeton and iShares succeeded with blockbuster products. “The top 1% of products in the industry were able to pull in $1 trillion in net new money last year…a continuation of the ‘winner-takes-all’ and blockbuster phenomena,” says Daniel Enskat, head of global consulting at Strategic Insight.

From Asia so did DaiwaSB Investments, thanks to a short-term bond product denominated in Australian dollars ($6.5 billion of inflows), and Shinko Asset Management, with a US Reit fund ($7.9 billion of inflows) – both income products, catering to the Japanese market’s insatiable demand for stable yield.

The biggest Asia ex-Japan fund for cashflows in 2011 was Polaris’s Taiwan Top-50 Tracker ($2.4 billion of inflows).

The 10 highest grossing funds in terms of net cash contributions from Asia ex-Japan gained $10.9 billion and those in Japan gained $40.6 billion.

The biggest gainers in Asia and Japan in 2011 were Asia-Pacific equity funds ($36.5 billion of inflows), real-estate products ($26.9 billion) and Asian fixed income ($15.2 billion). The biggest loser for regionally domiciled funds was global bonds (-21.4 billion in net outflows).

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