Growth in the Asia-Pacific's asset management industry is set to outpace that of any other zone globally over the next few years, a report noted yesterday.
The PwC report estimates that from 2017 to 2025, assets under management (AUM) in this region will almost double.
Asia-Pacific AUM is set to grow at a compound annual growth rate of 8.7 per cent, from US$15.1 trillion (S$20.5 trillion) in 2017 to US$16.9 trillion in 2020 and US$29.6 trillion by 2025, assuming protectionism remains limited and geopolitical activity stays relatively sanguine.
In particular, AUM in retail or mutual funds, including exchange-traded funds, are estimated to more than double to US$11.9 trillion.
Meanwhile, alternative asset popularity among Asian investors is expected to surge from US$2 trillion in 2017 to US$6.9 trillion by 2025, especially in real estate and infrastructure investment, said the PwC report.
Alternative assets refer to private equity, real estate, infrastructure, commodities and hedge funds.
PwC also noted that Asia is set to become one of the largest infrastructure investment regions globally, driven by massive growth expected from China's Belt and Road Initiative and other undertakings across the region.
RETHINK BUSINESS STRUCTURE
As such, asset and wealth managers should reorganise their business structure to support their priorities and specific capabilities and cut costs elsewhere. Firms must also embrace technology and nurture and retain talent as the industry reinvents itself to reflect its widening customer base.
PwC'S ASIA-PACIFIC ASSET AND WEALTH MANAGEMENT LEADER JUSTIN ONG, on how firms can combat fee pressure.
It added that the key management hubs of the region, Singapore and Hong Kong, will likely be joined by Shanghai.
Furthermore, the burgeoning wealth of individuals in the Asia-Pacific region will also provide opportunities for asset managers.
This will in turn propel huge growth in the region's wealth management industry, allowing it to overtake the more developed regions of Europe and North America, PwC said.
Regionally, the shift towards transparency surrounding fees, coupled with younger, tech-savvy investors turning to lower-cost alternatives such as robo-advisers, are set to increase pressure on fees and decrease margins, the report noted.
PwC's Asia-Pacific Asset and Wealth Management leader Justin Ong said: "As new investors enter the market, the industry will become increasingly digitalised, and investors will look to managers who can tailor portfolios to their needs. Firms will need to combat fee pressure by reducing costs and gaining new investors.
"As such, asset and wealth managers should reorganise their business structure to support their priorities and specific capabilities and cut costs elsewhere. Firms must also embrace technology and nurture and retain talent as the industry reinvents itself to reflect its widening customer base."
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.
And with investors demanding more clarity in their investments, sustainability investing is also on the rise, in part due to millennials who prefer to invest in alignment with their personal values, the report said.