The global asset management sector will reach a scarcely comprehensible $102 trillion of client assets by 2020, says a report examining issues such as tax transparency for the industry.
The global asset management industry will reach $102 trillion by 2020 and Asia-Pacific’s own figure will stand at $16.2 trillion by 2020, up from $7.7 billion in 2012, with PricewaterhouseCoopers predicting that tax transparency in funds will play a big part in deciding which managers win most business.
PwC has issued a report, called Asset Management 2020 and beyond: Transforming your business for a new global tax world, noting that because banks and insurers are retreating from some business lines – in certain cases due to tougher capital rules – this leaves the field more open for asset managers.
In turn, this development is attracting “huge focus” from tax authorities, who, PwC says, will have specialist teams with the capabilities to carry out much more detailed enquiries than in the past, and the powers to request real-time investor-related information.
The report said investors will expect asset management providers to have robust and efficient tax infrastructures and have little tolerance of tax uncertainty or tax adjustments and move to providers that offer products reflecting investor-specific tax profiles.
“In the lead up to 2020, investors’ evaluation on how their portfolios perform will focus predominantly on post-tax yields. Asset managers therefore, will have little choice but to respond by dispersing their strategic tax resources throughout their business operations to give front, middle and back office staff access to real-time expertise,” Florence Yip, asset management tax leader for Asia, PwC Hong Kong, said.
“At the same time, in-house asset management tax teams will need to evolve to deal with perpetual audits and to engage with tax authorities on a frequent basis to influence policy and help guide the implementation of tax rules,” Yip said.
The report goes on to say that when asset managers launch new product, they must perform more tests to make funds competitive in all channels. “With more transaction taxes, local withholding and self-assessment capital gains regimes, every asset purchase and sale will have to be carefully examined from a tax risk and reporting perspective. This will require asset managers to have real-time access to data on global tax regimes,” the organisation said.