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Offshore managers face $1.1 trillion in outflows: report

Offshore managers face $1.1 trillion in outflows: report

New global rules on information disclosure, combined with tax amnesties, could spark an exodus from offshore wealth managers, according to a report by Oliver Wyman and Deutsche Bank, released on Thursday.

Outflows due to crackdowns on tax avoidance, including the OECD-led Automatic Exchange of Information, may drive assets under management outflows totalling $1.1 trillion globally, out of which $520 billion will leave institutions in Asia ex-Japan, the report warned.

Kai Upadek, partner at Oliver Wyman, told Citywire Asia that Southeast Asian countries, in particular Indonesia and Malaysia, will ‘see significant movements from offshore.’

In March, Indonesia announced that a tax amnesty on assets held overseas had netted $330 billion.

The study, which extrapolated the $1.1 trillion figure from public figures reported by banks in the last wave of ‘regularisation’, said that the majority of the outflows will start to hit managers by the end of 2018.

Most of the repatriated funds will likely be held in cash deposits, or will be reinvested into family businesses, Upadek said, although onshore wealth managers in Apac and Latin America are likely to benefit from $200 billion in repatriated inflows.

The regulations come at a time when trading and managed account fee margins are falling and lending growth is slowing across private banks in the region.

The impact of the outflows on the offshore sector could be profound, according to Upadek.

‘As a result of AEOI and tax amnesties, we will probably see a repricing of the offshore books altogether. What price point do you attach to value propositions in a transparent world?’ he said.

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