Assets under management (AUM) in the segment now account for just under a quarter of the region's total AUM.
Allocation to equity mutual funds hit its lowest level for four years in 2012 as investors showed a preference for more conservative products. Assets under management (AUM) in the segment now account for just under a quarter of the region's total AUM.
Strong gains in the stock markets of Thailand and the Philippines in 2012 did not have much of an impact on the overall asset allocation to mutual funds in the region. This was one of the key findings in Cerulli Associates' recently released report, Asset Management in Southeast Asia 2013. The report assesses the state of the mutual fund industry in five countries, namely Malaysia, Thailand, Indonesia, the Philippines, and Vietnam.
Cerulli also found that the mutual fund industry in each country had its own unique set of drivers. "The Philippines remain a relatively small market, while equity funds in Thailand took a hit, partly because of redemptions within the Long-term Equity Fund (LTF) and Retirement Mutual Fund (RMF) segment in 2012," says Felix Ng, a senior analyst with Cerulli who led the report.
Ng notes that the strong interest in equity trigger funds in Thailand also limited asset retention due to the inherent structure of such funds. In the meantime, "the recent sell-off in Indonesian equity is expected to create a drag on the country's equity fund AUM in 2013 as well, given the small exposure to overseas investment for its mutual funds," he adds.
Still, the mutual fund industry should grow strongly over the next five years. Cerulli expects the region's AUM to show a compound annual growth rate of 13.2% during the period, due in large part to growing affluence in the region.
"Southeast Asia no longer lives in the shadow of its bigger and brighter siblings to the north. There is renewed vigor to the region, and this is evident through the wealth that is being generated," says Ken Yap, Singapore-based director and head of Asia-Pacific research at Cerulli.
How much of this wealth finds its way into the mutual fund industry is a moot point. "The appetite for international investing is still very much a work in progress. Building and managing relationships at a local level is key, and the ability to take the long view is crucial," Yap adds.
To play the long game, redefining the value proposition for clients in terms of services or products is something that managers are beginning to embark on to cater for an increasingly diverse client base.
For instance, in Malaysia, some managers are working with multimanager platforms and offer affluent clients a "core-satellite" approach to portfolio management. In Indonesia, managers are showing their creativity on the product front by launching mutual fund retirement savings plans (RSPs) that also provide free insurance coverage for accidents and dismemberment.
Allocation to equity mutual funds hit its lowest level for four years in 2012 as investors showed a preference for more conservative products. Assets under management (AUM) in the segment now account for just under a quarter of the region's total AUM.
Strong gains in the stock markets of Thailand and the Philippines in 2012 did not have much of an impact on the overall asset allocation to mutual funds in the region. This was one of the key findings in Cerulli Associates' recently released report, Asset Management in Southeast Asia 2013. The report assesses the state of the mutual fund industry in five countries, namely Malaysia, Thailand, Indonesia, the Philippines, and Vietnam.
Cerulli also found that the mutual fund industry in each country had its own unique set of drivers. "The Philippines remain a relatively small market, while equity funds in Thailand took a hit, partly because of redemptions within the Long-term Equity Fund (LTF) and Retirement Mutual Fund (RMF) segment in 2012," says Felix Ng, a senior analyst with Cerulli who led the report.
Ng notes that the strong interest in equity trigger funds in Thailand also limited asset retention due to the inherent structure of such funds. In the meantime, "the recent sell-off in Indonesian equity is expected to create a drag on the country's equity fund AUM in 2013 as well, given the small exposure to overseas investment for its mutual funds," he adds.
Still, the mutual fund industry should grow strongly over the next five years. Cerulli expects the region's AUM to show a compound annual growth rate of 13.2% during the period, due in large part to growing affluence in the region.
"Southeast Asia no longer lives in the shadow of its bigger and brighter siblings to the north. There is renewed vigor to the region, and this is evident through the wealth that is being generated," says Ken Yap, Singapore-based director and head of Asia-Pacific research at Cerulli.
How much of this wealth finds its way into the mutual fund industry is a moot point. "The appetite for international investing is still very much a work in progress. Building and managing relationships at a local level is key, and the ability to take the long view is crucial," Yap adds.
To play the long game, redefining the value proposition for clients in terms of services or products is something that managers are beginning to embark on to cater for an increasingly diverse client base.
For instance, in Malaysia, some managers are working with multimanager platforms and offer affluent clients a "core-satellite" approach to portfolio management. In Indonesia, managers are showing their creativity on the product front by launching mutual fund retirement savings plans (RSPs) that also provide free insurance coverage for accidents and dismemberment.
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