The Asia Pacific asset and wealth management industry will grow faster than in other regions with assets under management (AUM) expected to almost double to US$29.6trn in 2025 from $15.1trn in 2017, PricewaterhouseCoopers (PwC) predicts in its latest report.
According to the PwC report ‘Asset and Wealth Management 2025: The Asia Awakening', APAC AUM will grow at a total compound annual growth rate (CAGR) of 8.7% to $16.9trn in 2020 from $15.1trn in 2017. The 2025 target would be achieved provided protectionism remains limited and geopolitical activity remains relatively stable.
The growth will be driven mainly by retail mutual funds and sovereign wealth funds. Assets of retail mutual funds are forecast to more than double to $11.9trn in 2025 from $5.5trn in 2017. Assets of sovereign wealth funds are expected to double to $5.7trn from $2.8trn over the same period.
Passive and alternative investment strategies will likely become more popular and, together, account for more than 40% of assets in Asia Pacific, PwC says. Alternative asset popularity among Asian investors is expected to surge from US$2trn in 2017 to US$6.9trtn by 2025, especially in real estate and infrastructure investments. Alternative assets refer to private equity, real estate, infrastructure, commodities and hedge funds.
"The introduction of robo advisers and more digitalised fund advice will play a large role in paving the way for passive growth in the region, opening up new distribution channels and disintermediating current ones."
The burgeoning wealth of the mass affluent and high net worth individuals in the Asia-Pacific region will also provide opportunities for asset managers to service these growing segments. This will in turn propel huge growth in the region's asset and wealth management industry, allowing it to overtake the more developed regions of Europe and North America, PwC said.
Following the report, active strategies also seem to be losing ground to passive strategies as their lower cost is attractive to many investors.
"Asia-Pacific investors tend to be more active and focused on returns, and are prepared to take risks to reach their targeted returns... However, the introduction of robo advisers and more digitalised fund advice will play a large role in paving the way for passive growth in the region, opening up new distribution channels and disintermediating current ones.
"This new order will further be bolstered as pension reforms in countries such as China continue, allowing pensions to invest in passive assets," said PwC's Asia-Pacific Asset and Wealth Management leader Justin Ong.
Separately, the report noted that venture capital is one of the fastest-growing opportunities in the Asia-Pacific. The region now ranks just below the United States in terms of deals, with China leading the market and accounting for five of the top 10 largest venture capital investments at the end of 2017.