Asia continues to lag other regions for integrating ESG principles with investing; better data and stronger regulatory requirements will help institutional investors, market observers say.
Asia-Pacific ex-Japan was the second-fastest growing region for mutual funds. The markets of Hong Kong, Korea, India, Australia and New Zealand saw AUM grow by 23.3% in local currency terms to Ç875 billion ($1.1 billion), thanks to Ç24 billion of new inflows as well as equity-market performance (although New ZealandÆs market actually lost AUM). IndiaÆs industry performed best last year, growing AUM by 39% to Rs2 trillion (Ç37 billion, $43 billion).
The rest of the world also experienced growth in mutual fund assets last year, with European AUM up 20.9% to Ç5.3 billion ($6.8 billion), Canada up 14.9% to Ç409 billion ($521 billion) and the United States up 9.9% to Ç7.5 billion ($9.6 billion), or 52% of the Ç14.5 trillion ($18.4 trillion) of global total fund assets under management.
Although last year saw the worldÆs mutual fund assets grow, regional and country differences emerge in fund composition.
Worldwide, equity funds account for 50% of mutual fund assets. In Europe, equity fund assets declined in proportion to the total from 46% in 2000 to 41% at end-2005. Equity funds have expanded in the US to 56% of that market.
For Asia-Pacific ex-Japan, equity funds comprise 39%, but the level varies wildly by country, from a high of 64% in Hong Kong to an average 36% in India to a very low 13% in Korea û itself a huge increase over the past two years.
Japan is harder to classify, as the local definition of equity includes balanced funds, giving us a total of 74% of the market. Much of the new inflows, some Ñ7.7 trillion, went to equity funds with monthly dividends.
But Japan has a relatively small industry for money market funds, which represent only 5% of the Japanese market, compared to 6% in Hong Kong, 32% in India and 33% in Korea. Its bond fund market is also relatively smaller: 21% of the Japanese mutual fund assets, versus 24% in Hong Kong, 28% in India and 26% in Korea.
The survey data is good till end-2005 but the past six months have witnessed big changes in the markets, with equity market corrections that have no doubt whittled these gains. South Korea has also seen a mass exodus from its money market funds back to bank deposits. So already the Deutsche survey is now a relic û but a useful way to track the impressive growth in mutual funds in Asia during periods of good sentiment. Despite the recent corrections, the growth trend is likely to prevail.
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