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How tech, ETFs are changing Asia's AM landscape

How tech, ETFs are changing Asia's AM landscape

Wider use of technology in fund distribution, as well as higher demand for ETFs, are set to reshape the Asian asset management industry over the next 10 years.

According to a new report by Cerulli Associates, about 73% of respondents said they feel digitalization in distribution will influence the industry significantly over the next decade.

Previously, the digital focus of asset managers in Asia ex-Japan was more confined to enhancing clients’ overall experience using websites or apps, or setting up digital teams.

Their digital focus, however, has now progressed in many other areas, influencing other fund management areas such as product structuring and investment processes, in addition to distribution.

Ken Yap, the company’s managing director for Asia, said Cerulli expects at least a few prominent platforms to make their mark in online distribution over the next 10 years.

Even as banks get ready to scale up their digital platforms, one could reasonably foresee their overall distribution market share declining to some extent, he said.

This is due to growing competition from new platforms.

Meanwhile, the availability of passive and smart beta strategies could also influence managers’ product structuring and positioning plans.

Increased distribution of funds through digital platforms and greater use of ETFs will all serve to drive down costs for end investors, which in turn put pressure on fees.

These three factors are interconnected and are expected to play significant roles in influencing the way managers approach their businesses over the next decade.

Yap said he expects to see more product partnerships in areas such as sustainable investing, ETFs, and factor based strategies.

‘Indeed, product and fintech partnerships sit alongside passives and alternatives, in terms of the factors that could shape the industry,’ he added.

Leena Dagade, an associate director at Cerulli, said the declining fee trend is here to stay.

She added: 'Any changes in fee structures – such as migration to advice-based models – seem limited to wealthy customers.'

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