Major fund distributors in Asia expect demand among the regions’ retail investors to remain concentrated on China and Asia (ex – Japan) as investors continue to reduce and avoid exposure to the United States and European markets.

Every year, Greenwich Associates interviews many of Asia’s biggest distributors of retail investment products, including retail banks, private banks, insurance companies, asset managers, securities/fund platforms, and independent financial advisors. The 124 intermediary distributors participating in the Greenwich Associates 2011 Asian Intermediary Distributors Study distribute about USD500 billion in investment assets — or roughly 70% of the USD700 billion asset size that Greenwich Associates estimates for the overall intermediary market in Asia (ex - China and Japan).
 
In many markets, these distributors rank domestic stocks as far and away the top-selling equity products on their platforms. Behind domestic stocks, the products cited most often by distributors as ranking among their top-five selling equity products are Chinese equities, Asia (ex – Japan) and emerging market equities. In the coming year, 38% of fund distributors expect retail demand to increase for emerging market equities, 36% expect to see rising demand for Asia (ex – Japan) equities and one-third of distributors predict a demand increase for Chinese equities.  Asian fund distributors rank money market funds and balanced funds among their best-selling products in fixed income. Looking to the coming year, 37% of distributors expect to see a significant pick-up in retail demand for each of global bonds and emerging market bonds.
 
When it comes to selecting specific funds, many fund selectors across Asia do not have strong opinions about the ability of individual managers to deliver outperformance, so they rely on more accessible measures of performance and reputation. “Gradually, we expect Asian distributors to adopt a methodology similar to that used by fund selectors in North America and Europe, which analyses manager investment capabilities from both an organisational and process perspective to assess the firms’ ability to deliver future performance. But the message we are getting from distributors at present is that asset managers are not doing an adequate job explaining the underpinnings of their investment processes in a way that would give fund selectors such insight,” says Greenwich Associates consultant Abhi Shroff (pictured). Distributors are pressing for higher quality discussions and more timely communications from their asset managers— services that distributors say contribute directly to fund sales.
 
In Hong Kong and other Asian markets, regulators tightened rules governing the investment industry in the wake of the global market crisis. The Asian fund distributors participating in the 2011 Greenwich Associates study are calling for a variety of reforms to current regulations that they view as unnecessarily restrictive or cumbersome:
 
In Hong Kong, distributors would like to see a simplification of the sales process and quicker responses from the SFC.
 
In Taiwan, distributors want regulators to permit them to include a broader array of products on their platforms, including hedge funds, ETFs and China products.
 
In Korea, distributors would like rules for local hedge funds relaxed, particularly for short-selling.
 
In Thailand and Malaysia, distributors want regulators to allow investors to invest directly with foreign investment managers to save on fees.