The market share of multi-asset strategies in the countries of the Asia-Pacific region reached 20% of long-term funds in 2019, highlighting the growing prominence of these strategies in the region, according to a report by Broadridge Financial Solutions.
Multi-asset funds have gone from strength to strength with a five-year compound annual growth rate (CAGR) of 8.2% taking their assets under management (AUM) to US$726 billion by end-2019.
Taiwan showed the strongest 5-year AUM CAGR at 33%, followed by Thailand at 21%. Flows into the multi-asset fund space also staged a comeback from the redemptions witnessed in the first quarter of 2019 – largely attributed to performance woes – to three quarters of straight inflows.
“There are multiple drivers to account for the rising demand for multi-asset strategies – from the volatile macro backdrop to the asset class’s growing importance in the retirement toolkit and a gradual transition from a commission-led distribution model to a fee-based advisory one,” says Yoon Ng, Broadridge’s senior director APAC insights.
The market share of multi-asset funds – the third-biggest long-term asset class after fixed income and equity – has been inching higher in Asia in recent years, reaching 20% last year. In the last 10 years, cumulative multi-asset net flows have followed an upward trajectory, barring periods of market rallies. “They tend to do better in volatile periods” notes Ng.
In particular, with the hunt for yield and stable income a perennial theme among Asian investors, multi-asset income achieved success across multiple countries from Hong Kong, Japan and increasingly China. The top-10 best-selling multi-asset funds in 2019 had a one-year net return of at least 5% and most have monthly distribution features.
China was second-ranked in the region in terms of overall multi-asset AUM at US$200.8 billion, though 5-year CAGR to the end of 2019 was a lackluster 0.8%. Still, amid volatile stock markets, Chinese asset managers have also been exploring asset allocation and multi-asset products for better diversification, and to meet investors’ increasing retirement-investment needs.
“The market is home to both the highest number of multi-asset funds of any market in Asia-Pacific, as well as the highest volume of new launches in this category in 2019,” points out Ng.
Domestic asset managers in China have been increasingly launching actively managed multi-asset products through manager-of-manager (MoM) funds, funds of funds, and other sub-advisory services. The diversification properties of funds of funds mean they offer similar benefits to multi-asset portfolios.
“As such, new varieties of funds of funds and MoMs could spread in China to distribution channels, such as wealth management subsidiaries of banks and insurers, which are looking for external managers to help provide alternatives to replace traditional wealth management products,” adds Ng.