UOB Asset Management on Asia’s investment industry

Investors in Asia are beginning to look overseas to diversify their portfolios, reduce home-market bias and seek higher returns as cross-industry investment thrives

 

The investment industry has been growing, and today hosts some of the most exciting prospects in the global market. In that regard, the quantitative easing policies of major central banks have buoyed the economies of global developed markets and increased their attractiveness to potential investors, whether on home soil or abroad.

“Thailand’s investment management industry has evolved over the years”, says Vana Bulbon, Chief Executive of , Thailand (UOBAMT). “Investors have become more sophisticated with increased demand for foreign investment funds. There is also a gradual shift in the appetite from fixed income to equities.” Bringing together investment expertise from a wide range of asset classes and products, UOBAMT has become one of the country’s leading fund houses.

Asia’s middle-class population is expanding rapidly (see Fig. 1), and so too is the will to invest. Meanwhile an ageing Asian population looks to preserve its wealth for the future, whether for education, healthcare, retirement, or insurance. Asia’s investment management industry has embraced the abundance of new opportunities, growing its assets under management at an extraordinary pace. In the past, financial assets were concentrated largely on a single market or with a significant home-bias portfolio. But as markets continue to mature, investors are beginning to favour well-diversified portfolios across asset classes and geography.

The fast-growing economy of Asia and the rising affluence of the middle class have perhaps been the biggest factors in shaping the investment management sector

Slow and steady growth
Thailand has become a promising market in emerging Asia. Its solid fundamentals are seeing asset management firms exhibiting double-digit annualised growth of asset under management in recent years. Driven by an economic boom in much of emerging Asia, the wealth of the Thai middle class has been growing robustly. The impact that the rising affluence of the middle-class population has on the latest developments of the industry is significant and growing. Nonetheless, Asia’s investment management industry has a number of challenges to contend with at any given point, and this is also true with Thailand.

“Following the recent two consecutive policy rate cuts by the Bank of Thailand, local interest rates are currently at a five-year low. The low interest rate environment, coupled with limited upside gains from the local equity market due to subdued economic growth, means we are going to see continued investors’ preference for foreign investment funds”, says Bulbon. “As the deposit rate in the country remains low, there is a natural search for yield across asset classes and geographies.”

Fuelled by a low-yield environment and subdued economic growth, investors are exploring foreign investment solutions. In view of this, UOBAMT has launched a number of new foreign investment funds to offer investors options to have geographical diversification in their portfolio.

Headquartered in Singapore with business and investment offices in Thailand, Malaysia, Brunei, Taiwan and Japan, UOBAM Group has an extensive regional footprint. It also has two joint ventures – China-based Ping An UOB Fund Management Company and Singapore-based UOB-SM Asset Management. “In addition, we have many strategic alliances around the world that we can tap for their local expertise to offer investors a wider range of product and investment solutions”, says Bulbon.

UOBAM Group’s launch of Ping An UOB Fund Management Company in 2010 represented its first step into China. Since then, the group has been growing its regional footprint and capabilities through alliances with leading industry players and the opening of new offices across Asia. It has also built successful alliances with international foreign fund managers, such as Wellington Management in the US along with BlackRock, NN Investment Partners in the Netherlands and Sumitomo Mitsui Asset Management in Japan. These alliances have transformed UOBAMT from an Asian-centric fund house into one with international expertise and network.

“With strong partnerships worldwide, we are able to tap into expertise globally to offer solutions to help our clients seize investment opportunities to meet their financial needs and goals”, says Bulbon. In 2013, UOBAMT collaborated with Japan’s Sumitomo Mitsui Asset Management (SMAM) to offer two Funds – UOB Smart Japan Small and Mid-Cap Fund (UOBSJSM) and Japan Small and Mid-Cap Fund (JSM). UOBAMT also offers alternative products such as trigger funds, which are suitable for investors who are unable to monitor the market constantly. Trigger funds have an automatic redemption feature with the principal amount and absolute target return paid back to investors at a fixed target price.

“Providing investors with the right solution at the right time is important. For example, we launched the first high-yield mutual fund in Thailand in April 2014 after SEC relaxed restrictions by announcing a regulation to allow asset managers to set up accredited investor funds for unrated or non-investment-grade bonds. With yield at record low worldwide and improved economic outlook in the US, the fund launch was a success”, says Bulbon. As for the challenges in the region, “in Thailand, we face competition from local asset management firms which benefit from large local distribution networks. However, if we look at total assets under management, UOBAM Group is one of the largest unit trust managers in the Asia-Pacific region.”

Size and distribution of the middle class

Global presence with local knowledge
Asian asset managers such as UOBAM are attracting attention from around the globe, as international names look to secure the services of Asian-focused partners in the hope that they will give them the edge over their competitors. Though the pace at which Asia’s investment management is growing has led many to believe that success in the market will come easily, local knowledge will prove paramount for any new industry players.

As part of the firm’s growing portfolio of solutions, UOBAMT’s Premier Online” platform enables investors to access the firm’s services online at their convenience. Service innovations and technology improvement is an important factor to cater to investors’ lifestyles and enhance competitiveness in the industry.

The fast-growing economy of Asia and the rising affluence of the middle class have perhaps been the biggest factors in shaping the investment management sector, though a close second is the matter of changing customer preferences. UOBAMT keeps up with the changing business environment by ensuring its operating models keep pace with the development accordingly.

As part of its commitment to provide solutions and advisory services that best suit customer needs, UOBAMT will continue to be stringent in its product selection, strengthen its financial advisory capabilities and enhance its fund distribution channels. “Our long-term goal is to become the premier regional leader in investment management and advisory services, and to be recognised for our focus on meeting our customers’ financial needs and maximising investment returns”, says Bulbon.

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