BNY Mellon: Understanding is key to cracking Asia
17 July 2015 New York
Image: Shutterstock
It’s important for investors to be aware of the subtle differences between key Asian countries, according to a survey by BNY Mellon and analytics and advisory firm Oxford Metrica.
The study looked at trends across Singapore, Taiwan, Hong Kong and South Korea, and noted that the differences between the markets also applies to distribution channels, and other factors that have an impact on the market.
For example, Hong Kong retailers showed a preference for low-cost fund complexes that could meet all of their needs, while Taiwanese retailers appeared to be more inclined towards appointing specialist managers for each category.
The report also highlighted the comparatively high costs faced by retail investors in South Korea, compared to institutional investors, and noted that in Singapore and Taiwan, more importance is placed on investment performance, while in Hong Kong, the security of a well-known brand takes prevalence.
There were also differences in price sensitivity. While retail investors in Singapore, Hong Kong and South Korea that invest cross-border are sensitive to pricing by investment firms, this is not such a concern in Taiwan.
South Korean institutional investors enjoy the lowest fund prices and, at the same time, regulatory developments in South Korea are geared towards attracting more international assets.
Product range preferences also vary – a one-stop shopping solution is popular among retail investors in Hong Kong, and they tend to favour firms that can provide funds suitable throughout different market cycles. Hong Kong institutions, however, generally favour niche providers that can provide specialist expertise.
Retail investors in Taiwan and South Korea were more inclined towards funds offered by specialist providers, and the retail market in Taiwan has even greater product diversity than Hong Kong.
For retail and institutional investors in Singapore and Taiwan, and, to some extent, South Korea, the report suggested that a fund’s relative performance to the index as important. In Hong Kong, however, brand security tends to hold more weight.
In Hong Kong, brand security appeared to hold greater weight than outperforming the benchmark in the long-term, however cumulative returns over one-year, three-year and five-year periods were shown to be a strong driver of sales for retail investors across all four markets.
Singapore, Hong Kong, Taiwan and South Korea are all markets where the European UCITS structure is widely accepted, and so represent accessible entry-points for non-Asian investment managers looking to sell funds.
Daron Pearce, global investment manager segment head for investment services at BNY Mellon, said: "Sales success in Asia's major cross-border funds markets requires a deep understanding of the different factors that inform retail and institutional demand."
He added: "As one might expect, retail investors are generally more price sensitive than institutional investors. However the interplay between price, product range and performance is finely balanced across all markets analysed and, as such, close attention to the realities of individual markets is required by fund promoters."
The study looked at trends across Singapore, Taiwan, Hong Kong and South Korea, and noted that the differences between the markets also applies to distribution channels, and other factors that have an impact on the market.
For example, Hong Kong retailers showed a preference for low-cost fund complexes that could meet all of their needs, while Taiwanese retailers appeared to be more inclined towards appointing specialist managers for each category.
The report also highlighted the comparatively high costs faced by retail investors in South Korea, compared to institutional investors, and noted that in Singapore and Taiwan, more importance is placed on investment performance, while in Hong Kong, the security of a well-known brand takes prevalence.
There were also differences in price sensitivity. While retail investors in Singapore, Hong Kong and South Korea that invest cross-border are sensitive to pricing by investment firms, this is not such a concern in Taiwan.
South Korean institutional investors enjoy the lowest fund prices and, at the same time, regulatory developments in South Korea are geared towards attracting more international assets.
Product range preferences also vary – a one-stop shopping solution is popular among retail investors in Hong Kong, and they tend to favour firms that can provide funds suitable throughout different market cycles. Hong Kong institutions, however, generally favour niche providers that can provide specialist expertise.
Retail investors in Taiwan and South Korea were more inclined towards funds offered by specialist providers, and the retail market in Taiwan has even greater product diversity than Hong Kong.
For retail and institutional investors in Singapore and Taiwan, and, to some extent, South Korea, the report suggested that a fund’s relative performance to the index as important. In Hong Kong, however, brand security tends to hold more weight.
In Hong Kong, brand security appeared to hold greater weight than outperforming the benchmark in the long-term, however cumulative returns over one-year, three-year and five-year periods were shown to be a strong driver of sales for retail investors across all four markets.
Singapore, Hong Kong, Taiwan and South Korea are all markets where the European UCITS structure is widely accepted, and so represent accessible entry-points for non-Asian investment managers looking to sell funds.
Daron Pearce, global investment manager segment head for investment services at BNY Mellon, said: "Sales success in Asia's major cross-border funds markets requires a deep understanding of the different factors that inform retail and institutional demand."
He added: "As one might expect, retail investors are generally more price sensitive than institutional investors. However the interplay between price, product range and performance is finely balanced across all markets analysed and, as such, close attention to the realities of individual markets is required by fund promoters."
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