THE CERULLI REPORT Asian Business Strategies Making the Breakthrough Overview This report analyzes viable entry and expansion strategies for asset managers in Asia, including Japan but excluding Australia. It aims to help asset managers size the pool of retail and institutional assets they can access, and consider different approaches to different markets, depending on regulations, company goals, and budgets. We also analyze the competition and opportunities in the retail and institutional space before wrapping up with our conclusions and some recommendations for fund houses looking to succeed in the region, based on best practices that Cerulli has observed. Where relevant, case studies on specific companies as well as extended notes on key related issues are interwoven into the chapters. Benefits Analyze the viability of setting up an onshore presence versus serving investors from an offshore base Identify subadvisory opportunities in Japan and Southeast Asia Evaluate the successes and failures of joint ventures and mergers and acquisitions Questions Answered 1. How large are Asia ex-japan s assets under management in both retail and institutional spaces and how are they expected to grow? 2. What are the pitfalls that global managers should be mindful of when going onshore? 3. In which country does an offshore strategy make more sense, and why? 4. What are the distribution opportunities as well as challenges that can arise as a result of the impending mutual recognition arrangement between Hong Kong and China, and the ASEAN fund passport? 5. How can managers attract the attention of big institutions and win business from these institutions? 6. Is a joint venture still the best way to access opportunities in China? 7. How can fund houses operate successful retail businesses in Japan without an onshore presence? 4 TO PURCHASE CALL +1 617-437-0084 EMAIL info@cerulli.com VISIT www.cerulli.com HAVE US CONTACT YOU: http://clients.cerulli.com/tiny/diq9 Subscription Information $15,000 Hardcopy Digital in color Unlimited online firm-wide access Exhibits in Excel Key findings Analyst support LOOK INSIDE 9 pages of report content attached 112 pages, 46 exhibits
Index of Exhibits INDEX OF EXHIBITS Chapter 1: Sizing the Opportunities 1. Asia Ex-Japan Mutual Fund Assets Under Management, 2009 2013...17 2. Asia Ex-Japan Institutional Investable Assets Under Management, 2009 2013...18 3. Snapshot of Asset Management Industry in China, 2013...19 4. Snapshot of Asset Management Industry in Taiwan, 2013...21 5. Snapshot of Asset Management Industry in Korea, 2013...22 6. Snapshot of Asset Management Industry in India, 2013...23 7. Comparison Between Hong Kong s Professional Investors and Singapore s Accredited Investors...25 8. Neuberger Berman s Funds Sold in Taiwan, March 2014...26 Chapter 2: Going Onshore 9. Regulatory Requirements to Establish a Fund Management Company in Asia by Country, 2014...29 10. Fund Management in Southeast Asia at a Glance, 2014...32 11. Asian Mutual Fund Assets Under Management by Domicile, 2009 March 2014...33 12. Local vs. Foreign-Owned Fund Management Companies by Marketshare, 2010 2013...35 13. Local Indian Fund Managers Assets Under Management, 2012 March 2014...37 14. Smallest 10 Mutual Fund Managers in Indonesia by Assets Under Management (AUM), March 2014...38 15. Key Events in Threadneedle Investments Asian Expansion, 2010 June 2014..41 Chapter 3: Staying Offshore 16. Japanese Investment Trust Asset Under Management Outsourced to External Managers, 2000 June 2013...43 17. Outsourced Share of Investment Trust Assets Under Management by Fund Category, June 2013...44 18. Subadvisors Ranked by Subadvised Assets Under Management, June 2013...46 19. Snapshot of Foreign Asset Management Companies and Their Master Agents in Taiwan, June 2014...48 20. Largest 10 Master Fund Managers for Thai Feeder Funds, March 2014...50 21. Largest 20 Feeder Funds in Malaysia by Assets Under Management, March 2014...52 22. Japanese Mutual Fund Net New Flows, 2009 June 2014 YTD...54 The Cerulli Report Asian Business Strategies 2014 5
Index of Exhibits Chapter 4: Sizing Up the Competition Retail 23. Asia Ex-Japan Mutual Fund Assets Under Management by Country, 2009 2018E...58 24. Cerulli s Rating of Factors That Aid Success in Asia s Fund Management Industry, by Importance...59 25. Snapshot of Fidelity s FundsNetwork in Hong Kong, March 2014...60 26. Chinese Fully Operational Joint Venture Assets Under Management, 2013 March 2014...62 27. Part or Wholly Foreign-Owned Indian Fund Managers Assets Under Management, 2013 March 2014...65 28. Largest 10 Indian Mutual Fund Managers, 2012 March 2014...68 29. Largest and Smallest 10 Mutual Fund Managers in Indonesia, March 2014...70 30. Snapshot of Selected Companies with Operations in Singapore, Thailand, and Malaysia, March 2014...71 31. Largest 20 Mutual Fund Managers in China, March 2014...73 32. Selected Online Fund Investment Platforms in China, March 2014...75 33. Cerulli Asset Manager Survey Respondents Views on Which Client Segments They Are Most Keen to Tap Over the Next Three Years, 2013 2014...77 Chapter 5: Sizing Up the Competition Institutional 34. Asia ex-japan Addressable Institutional Assets by Country, 2013E 2017E...79 35. Asia ex-japan Percentage of Institutional Assets Outsourced by Country, 2012...81 36. Regional Asset Managers Views on Areas Where Consultants Are Involved, 2013...82 37. Key Institutions Alternative Allocations as a Percentage of Portfolio, 2008 2012...83 38. Selected Asian Institutions External Managers for Alternative Investments, June 2013...85 39. Cerulli Asset Manager Survey Respondents Views on External Asset Manager Selection Criteria, 2009 2013...88 Chapter 6: Being Successful in Asia 40. Top 10 Mutual Fund Managers Marketshare and Number of Managers Across Selected Asian Markets, 2010 2013...92 41. Average Institutional Mandate Size in Asia ex-japan, 2014...94 42. Selected Mergers & Acquisitions in Asian Asset Management, 2013 July 2014...97 43. Asset Management Companies That Received Business Licences in Hong Kong Between 2009 and April 2014...100 6 The Cerulli Report Asian Business Strategies 2014
Index of Exhibits Appendix A.01. Summary of Key Deregulations at Asia ex-japan Institutions, 2011 2013..102 A.02. Selected List of Fund Houses With Mandates from Asian Institutions...103 A.03. Top 10 Asset Management Companies by Assets in China, India, and Korea, March 2014...108 The Cerulli Report Asian Business Strategies 2014 7
Sample Section Asian Business Strategies: Making the Breakthrough
Sizing the Opportunities Chapter 1 EXHIBIT 4 Snapshot of Asset Management Industry in Taiwan, 2013 Source: Cerulli Associates Taiwanese Asset Management Industry Managed by onshore SITEs Managed by offshore managers Mutual funds US$57.2 billion Discretionary management US$33.2 billion Mutual funds US$90.8 billion Discretionary management Products not regulated by FSC State Pension mandates US$16.0 billion Other institutional mandates, HNW US$17.3 billion State pension mandates US$22.6 billion Other institutional mandates, HNW Largely attributed to affiliated managers for FHCs assets Sold onshore through appointed Master Agents (SITEs, SICEs) Sold onshore through overseas banking units (OBUs) (and potentially overseas securities units, or OSUs) Taiwanese regulators have in recent years been trying to level the playing field between onshore and offshore products as they attempt to grow the local funds industry. The result is a tighter rein on foreign managers and a loosening of rules on product development for onshore players. From January last year, managers can only submit one offshore fund for approval at a time, down from three and six in the past. Managers are also being assessed on their contribution to the local funds industry: Those that set up an office in Taiwan, hire and train more locals, and have investment teams in the country can enjoy perks that include being able to submit more offshore funds for approval and quicker fund approvals. Yet, there appears to be a loophole that offshore players can exploit private banks in Taiwan. In January this year, the Financial Supervisory Commission (FSC) allowed offshore banking units (OBUs) in Taiwan to sell wealth management products, including mutual funds, to their offshore client accounts. Essentially, foreign managers can put their funds on Taiwanese private banks shelves to be sold to OBU account holders. The funds need not be registered with or approved by the FSC, unlike current offshore funds sold to retail investors. So far, two mainland Chinese managers have capitalized on the change: China Asset Management is working with Citibank Taiwan to offer its RQFII exchange-traded fund (ETF) through the bank s OBU platform, while China Universal Asset Management is collaborating with Standard Chartered Bank to distribute its renminbi bond fund. It looks as though Taiwan is attempting to go the way of Hong Kong and Singapore (see below), but Cerulli believes the former is still some way off from being a private banking The Cerulli Report Asian Business Strategies 2014 21
Company Index COMPANY INDEX Aberdeen Asset Management.........................................60, 72, 83, 87, 95 AIA.........................................................................55 AllianceBernstein..............................................................99 Aminvestment Services.........................................................53 Amundi Asset Management................................................35, 80, 99 Amundi Hong Kong.............................................................87 APS Asset Management.........................................................99 Ashmore Investment Management.................................................99 Bank of China.................................................................27 Bank of Yokohama.............................................................60 Baring Asset Management.......................................................99 BBL Asset Management.........................................................51 Birla Sun Life..................................................................34 BlackRock...............................................31, 36, 51, 53, 74, 83, 84, 99 Blackstone...................................................................84 BNP Paribas Investment Partners........................................35, 69, 70, 80 BNP Paribas Investment Partners Malaysia..........................................80 BNP Paribas Investment Partners Najmah Malaysia...................................80 BNY Mellon...................................................................35 BNY Mellon Western Fund Management............................................35 BOCI-Prudential Asset Management...............................................81 Brandes Investment Partners Asia.................................................99 Cambridge Associates..........................................................82 Chiba Bank...................................................................60 China Asset Management............................................21, 34, 61, 76, 81 China Investment Corporation....................................................96 China Universal Asset Management.............................................21, 76 CIMB-Principal Asset Management................................................71 Citibank Taiwan................................................................21 Cititrust & Banking Corporation....................................................99 Cohen & Steers Capital Management..............................................44 Daiwa Asset Management....................................................44, 47 Deutsche Asset Management..................................................60, 61 Eastspring Investments.......................................................44, 72 Edelweiss Asset Management....................................................36 Fidelity Worldwide Investments..........................................34, 60, 89, 99 Finansa Asset Management......................................................51 Franklin Templeton Asset Management........................23, 53, 60, 67, 83, 87, 89, 99 The Cerulli Report Asian Business Strategies 2014 109
Company Index Fullerton Fund Management...................................................40, 95 Goldman Sachs Asset Management.......................................34, 44, 84, 87 Harvest Fund Management...................................................34, 61 HDFsset Management..............................................34, 61, 67, 69 HSBC Indonesia...............................................................69 HSBC Life....................................................................81 ICBC Credit Suisse.............................................................34 ICICI Prudential Asset Management.............................................34, 61 Indiabulls Asset Management.....................................................36 ING Investment Management.....................................................27 INVESCO.................................................................44, 99 J.P. Morgan....................................................44, 60, 74, 95, 96, 99 Jupiter Asset Management.......................................................87 KAF Fund Management.........................................................80 Kinki Osaka Bank..............................................................60 Kokusai......................................................................44 Krungthai Asset Management.....................................................51 L&T Finance Holdings...........................................................34 L&T Investment Management.....................................................36 La Salle......................................................................44 Land and House Fund Management...............................................50 LBN Advisers.................................................................99 Lehman Brothers........................................................26, 43, 56 Lilian Co.....................................................................99 Lujiazui International Trust.......................................................20 M&G Investments...........................................................84, 95 Macquarie Group..............................................................84 Manulife Asset Management...................................................72, 81 Mercer.......................................................................82 Merrill Lynch..................................................................40 MGPA.................................................................36, 83, 84 Mirae Asset Management........................................................22 Mitsubishi UFJ Asset Management...........................................44, 47, 56 Morgan Stanley Investment Management.....................................34, 44, 67 Morningstar...................................................................96 Neuberger Berman..........................................................26, 40 NH-CA.......................................................................34 Nikko Asset Management...............................................36, 40, 44, 56 Nomura Asset Management................................................47, 57, 87 Nomura Funds Research and Technologies.......................................57, 87 Nomura Holdings..............................................................20 110 The Cerulli Report Asian Business Strategies 2014
Company Index Nomura Research Institute....................................................42, 43 Nonghyup....................................................................35 OCBC Bank..................................................................27 Okasan Asset Management......................................................44 One Asset Management.........................................................50 Pelagos Capital Management.....................................................83 Phatra Asset Management.......................................................50 Philam Asset management.......................................................55 Pictet Asset Management........................................................60 PIMCO................................................................44, 51, 95 PIMCO Advisors Japan..........................................................56 Power Corporation.............................................................61 Principal Global Investors.....................................................74, 99 Prudential Plc.................................................................61 PT Eastspring Investments.......................................................69 Reliance Capital...............................................................69 Russell Investments............................................................82 Sahara Asset Management.......................................................36 Samsung Asset Management.....................................................22 SBI Mutual Fund...............................................................69 SCB Asset Management.........................................................51 Schroder Investment Management..................................52, 60, 69, 70, 95, 99 Securities and Futures Commission................................................19 Shanghai Jiu You Equity Investment Fund Management................................20 Shanghai Leadbank Asset Management............................................35 Shanghai Lujiazui Financial Holding Co.............................................20 Shinhan......................................................................35 Shinhan BNP Paribas...........................................................34 Shinko Asset..................................................................44 Shizuoka Bank................................................................60 Standard Chartered Bank........................................................21 Standard Life Investments.......................................................61 State Street Global Advisors................................................31, 35, 51 Sumitomo Mitsui Asset Management...............................................56 SVG Advisers.................................................................83 T. Rowe Price.................................................................44 Thanachart Fund Management....................................................51 Threadneedle Investments.......................................................40 TianHong Asset Management..................................................60, 76 Towers Watson.............................................................82, 84 Treasury Asia.................................................................36 The Cerulli Report Asian Business Strategies 2014 111
Company Index Truston Asset Management......................................................99 UBS Hana....................................................................34 UBS Wealth Management.......................................................95 UOB Asset Management (Thailand)................................................51 Vanguard Investments Hong Kong.................................................87 Western Asset Management......................................................44 Western Securities.............................................................35 Zhongrong International Trust.....................................................35 112 The Cerulli Report Asian Business Strategies 2014