Cerulli Report On Asia Examines Private Banks, Insurers In How They Retain Assets

Tom Burroughes

17 September 2013

A new report on Asia’s financial markets by Cerulli Associates, the research firm, finds that private banks encourage product innovation and attract larger volumes, while insurers often provide stickier flows through investment-linked products.

Raising mutual fund assets in Asia ex-Japan seldom equates to retaining assets, says.

“Large funds do not necessarily get the strongest inflows and even when they do, asset retention is often a problem,” it says.

The reasons for this situation include high “churn”, investors' persisting penchant for short holding periods, and potential erosion of first mover advantage due to a bad investor experience, Cerulli's Asian Distribution Dynamics 2013 report says.

This conclusion applies across several Asian markets, including China, Korea, and Taiwan (onshore funds). In Korea, for example, some 87 onshore equity funds were launched in 2010, raising an average of $14.4 million each. A year later, four of the funds were shut, and the remaining 83 saw an increase in their average assets under management to $21.2 million. By the end of 2012, there were only 77 funds left.

Cerulli argues that such results explain why “distribution dynamics” come into play. Getting a fund on board the right channels is important not only to gather, but also retain, assets. Private banks, for example, can be a test-bed for innovative products, especially exotic, higher-risk products, while insurers can provide stickier flows through investment-linked products.

Cerulli's survey of Asia-based fund houses, conducted to gather proprietary data for the report, found that private banks and insurers rank second and fourth, respectively, as the channels fund companies most want to tap over the next three years.

"Fund houses don't have to jump through too many regulatory hoops to get their products registered for sale to wealthy investors," says Ken Yap, Singapore-based director and head of Asia-Pacific research at Cerulli. "That's not the case for some

funds sold to mass retail investors which, post-2008 global financial crisis, continue to be closely scrutinized by some Asian regulators and can take a long time to receive approval.