Singapore-based Gary Sim, lead of traditional managed investments - due diligence for Apac/EMEA, Citibank told Citywire Asia income strategies will be in demand for the next five years.
Tell us about the new collaborations that Citi has with asset management companies in 2016.
Citi has an extensive consumer business reach across both Apac and EMEA, operating in 12 countries in Asia and five in EMEA.
We look to distribute investment solutions from asset management firms that are differentiated as firms as well as with their products.
This differentiation may include talent in the firm, sustainability of product performance, uniqueness of investment approaches and investment philosophies, robustness of risk management (both corporate as well as at the portfolio level), extensiveness of distribution network and coverage, and even in areas where thought-leadership is crucial.
What strategies are you hoping to see more of and why?
Evolutionary finance. An asset manager’s understanding of market cycles is critical to effective top-down asset and sector allocation for their portfolios.
This aspect is not only important in drawing correlations between different asset classes and regions, but also in benefitting from these conclusions.
The informational advantage offered by most capital markets today are derived from macroeconomic and monetary policies.
Greater flexibility. Flexible strategies to capture the alpha offered through the full spectrum of an asset class.
This is increasingly relevant in what is an increasingly connected global investment regime.
What strategies are you turning away and why?
Given the strong demand for yield, some investors are taking on additional risk exposure greater than typical open-end mutual funds.
This investor move up the risk curve in search of higher yields is a result of the search for yield and the expansion of additional share classes to meet client demand.
Are there fund features that are more sought after by Asian investors than investors elsewhere? Why?
The lack of effectiveness in global monetary and fiscal policies and the lack of homogeneity in global economic growth rates are ensuring a continued investor focus on minimum volatility as well as income strategies.
The search for less volatile income streams will drive a wide consideration of strategies, including liquid alternatives.
The danger of focusing too narrowly on the current market phase is that some may be missing out on what could actually be trending equity markets and/or select fixed income segments.
How do you expect fund penetration rate in Asia to change over the next five years?
Over the next five years the Asian mutual fund industry will face changing demographics, with baby boomers approaching retirement.
Income strategies will be a core demand for this generation.
The industry will also be impacted by regulatory developments on product transparency and appropriateness.
Unlike the US and Europe, where regulatory focus has been on accountability (both at the firm and at individual levels), the Asian regulatory spotlight is likely to continue to be on product risks, transparency of disclosures and distribution appropriateness.
With channel clout entrenched with large distributors, I would expect asset management companies to adapt their servicing levels accordingly.
Changes to current servicing models can be expected as distributors will be looking to differentiate their advisory packages.
Increasingly, where product level innovation has proven ineffective in generating new net inflows, investment thought leadership will be critical but will require significant investment – firm skillsets, distribution of resources and servicing models.
What is your advice to asset management companies keen to penetrate private banks in Asia?
Both private and consumer banks will continue seeking asset management companies that are innovative and relevant in their product strategies.
Asset management companies that are willing to combine active strategies with elements of passivity are likely to connect with the investment demand of retiring baby boomers as well as millennials.
Traditional mutual funds
Number of team members:
Four in Singapore
No. of approved funds on platform:
More than 2,600
No. of approved asset management companies:
More than 100
No. of funds on focus list:
More than 160
No. of asset management companies on focus list:
More than 27
The article was first published in the October issue of the Citywire Asia magazine supplement.