Fintech pacts boom as Asian fund managers battle for assets: report
Asian asset managers are increasingly entering into strategic fintech partnerships with other managers in the region due to rising costs and competition, according to a report published by Cerulli Associates.
The Boston-based investment report specialists have outlined a rise in joint ventures, particularly in the financial technology sectors, as firms look for different business strategies to try to enhance their revenue streams in this increasingly competitive sector.
The firms’ newly-released report is entitled Asian Distribution Dynamics 2016: Responding to an Evolving Landscape.
It highlights that excluding Hong Kong and Singapore, most Asian markets are still inaccessible to foreign managers, with some markets, such as Taiwan and Korea, showing an increase in home bias agreements.
“An absence of distribution partners and lack of brand recognition are problems new entrants have to contend with and partnering with a local partner is seen as the best way to raise assets without a large initial investment,” says Shu Mei Chua, an associate director at Cerulli, who led the report.
She notes that such strategic pacts are largely aimed at three key areas: asset growth potential, product development, and distribution dynamics.
For example, E Fund Management entered into a partnership with Danske Capital to “jointly design and promote” investments. Korea’s Samsung Asset Management and its sister company, Samsung Securities, together have four pacts with other Asian or global managers as the firm’s try to bring recognisable global managers to Korean shores.
‘Tighter regulatory environment’
“While most partnerships entered into so far are targeting joint product developments, we expect strategic partnerships to get more creative in light of a tighter regulatory environment and the rise of financial technology,” added Chua.
Cerulli’s report says that many asset managers are looking to alternative methods of distribution in the region, dominated by brokerages and banks, with digital channels set to play a big part in the next stage of distribution.
Digital marketing ‘increasingly prevalent’
It points that digital marketing is increasingly prevalent in the region with fund managers in China and India having the largest budget allocations relating to using various digital tools in a bid to reach investors.
The use of messaging app WeChat to promote funds and provide investor education is considered “indispensable for managers looking to gain customers in China,” said Ivan Han, a senior analyst with Cerulli.
He adds that robo-advisors are possibly on the cusp of disrupting the asset management industry in Asia by forcing the industry to consider how to offer inexpensive, scalable advice to the majority of investors who are often ignored because they have smaller accounts.
“Robo-advisory is more of a distribution story in that it allows managers to tap capital from investors who had been reluctant to invest in mutual funds due to a lack of advice,” Han said.