Malaysian asset managers had a tough 2015 trying to retain client assets amid falling oil prices, the political scandal at state fund 1MDB and global investor flight from emerging markets.
And 2016 is proving tricky too. Managers only managed a third of the mutual fund sales volumes they managed in the same period last year, said Munirah Khairuddin, CEO of CIMB-Principal Asset Management in Kuala Lumpur.
Moreover, institutions are no longer such attractive targets for local fund firms. This is because big domestic asset owners are not keen on adding more public-market equities and bonds, but are directing more money toward real estate and private equity, noted Sandeep Singh, Malaysia chief executive at US fund house Franklin Templeton.
This has led some asset managers to seek to focus on building their retail business. CIMB-Principal, for example, is upbeat about the emergence of a new class of cash-rich individual investors.
“The rise of the middle-income client is the key change,” said Khairuddin. “This segment is equally as important to pension funds as it is for asset managers. It’s the middle income client that is providing the growth.”
These newly wealthy investors are buying global multi-asset funds with a long-only absolute-return bias, she noted.
“Regional funds have picked up the most interest from investors, indicating that local investors appreciate the value of diversification, even though currency moves have not been in their favour in the past year,” she added. The ringgit has weakened against both the dollar and regional currencies in that time.
Khairuddin said investors were “a lot more savvy about global markets” after recent financial market meltdowns and the scandals at home and were starting to mobilise their money again. “They are realising there is really good value in the Malaysian stock market. There is a lot of smart money waiting to come back.”
All that said, a March report from Canada’s Manulife struck a more downbeat note for about the potential of retail business for fund houses in Malaysia. It found that, across eight markets in Asia, Malaysian investors are the most indebted.
According to the report, 68% of Malaysian households were in debt – more than double the regional average of 33%. Average per capita debt is RM56,000 ($13,700), nearly 10 times the average monthly personal income.
Meanwhile, Malaysian fund managers do not see a great deal of potential business in cross-border fund schemes being developed, notably the Asean passport scheme. One exception, however, is sharia-compliant funds, with Malaysian firms having built strong expertise in this area.
Singh of Franklin Templeton said: “A reciprocal arrangement in terms of passporting of sharia funds could give a real boost if Malaysian funds could be sold in Indonesia and other countries in the region.”
* A longer version of this article appears in the latest (April) edition of AsianInvestor magazine.