The document examines the asset management industry in Asia Pacific, focusing on market size and growth, asset allocation, regulation, and internationalization of fund management. It discusses key areas of the industry including mutual funds, pension funds, wealth management, and exchange traded funds. Emerging trends are driving growth in the region such as rising wealth among individuals and countries. While opportunities exist, asset managers also face challenges relating to regulation, operations, technology, and attracting talent. Overall the Asia Pacific asset management industry is poised for continued expansion in the coming years.

2. 2
Introduction
Asset Management Industry Snapshot
Asset Management Industry- Overview
Asset Management Services
Demographic Trends
Emerging Markets
Industry challenges & Issues
Asset Management Industry Outlook
Global Asset Management Industry Growth
Hedge Funds
Pension Fund
Real Estate In Asia Pacific
Mutual Fund
Asset Management Industry – Key Challenges
Asset Management Industry – 2020
Key Market Trends and Recommendations

3. The report examines industrial organization and institutional development of
asset management industry economies in Asia Pacific. We focus on the size and growth
of the buy-side of the respective financial markets, asset allocation, the regulatory environment, and the state
of internationalization of the fund management industry in its key components – mutual funds, pension funds
and asset management for high net worth individuals.
Report links these to the evolution of professional asset management in these environments to the
development of the respective capital markets and to the evolution of corporate governance. Fund
management industry occupies a very small niche in domestic financial systems that are dominated by banks.
We will pay more focus on Exchange Traded Funds. Exchange Traded Funds (ETF’s) are one of the
fastest growing segments in the asset management industry and ETF’s in Asia have evolved over the past years
and experienced double digit growth year after year since 2008.
3

4. Amid unprecedented economic turmoil and
regulatory change, most asset managers have
afforded themselves little time to bring the future
into focus. But the industry stands on the
precipice of a number of fundamental shifts that
will shape the future of the AM industry.
The way many asset managers operate in
2020 will be significantly different compared with
the 2013 model. Wei, represents just one
example of how funds might be sold and
distributed in 2020.
Global investable assets for the asset
Management industry will increase to more than
$100 trillion by 2020, with a compound annual
growth rate of nearly 6%. Asset managers must
both create positive social impact and deliver the
clear message that they are a force for good, to
investors and policymakers.
4

5. The asset management industry is comprised of firms that purchase, hold and sell securities for
investment purposes. Many different types of firms participate in the investment management industry,
such as mutual fund companies, investment advisors, banks, insurers, brokers, third party administrators
and service providers. Asset Management and Investment Management are used interchangeably.
The major objectives that asset managers strive to achieve include:
• Creating superior investment returns within the parameter of a portfolio’s investment mandate (as
measured against its performance benchmark and its defined peer group)
• Managing the execution costs of growing trading volumes, and convincing clients that the firm maintains
the necessary technology infrastructure to manage money well and cost effectively.
5

6. Asset Management Services are typically divided into two business groups which serve the needs of
institutions and wealthy individuals.
Asset Management Services
Private Banking/ Client
Services/ Wealth Management
Investment Management
6

7. More than half of the world population of 3.45 billion are in the Asia’s Pacific region. The
Population of Asia Pacific region is projected to rise by more than 400 million people in the next
two decades. There are extremely wide variations in the population sizes of the 48 countries
and areas in the Asia Pacific Region, with very small Island countries such as Niue, having less
than 2000 inhabitants in 2005, to giants such as China and India with populations of 1.31 billion
and1.3 billion respectively.
Another major demographic change is population growth in Asia and Africa. It is predicted that
over 75% of the world’s population will reside in Asia Pacific and Africa by 2040 and India is expected to have
the world’s largest population by 2030. This means there will be a massive growth in demand for food and
energy in those countries and companies that
service those needs should be good investment
opportunities. The overriding influence on equity
markets in the next 20 years is likely to be ongoing
pressure on scarce resources-primarily food, energy
and water.
7

8. The demographics of the HNWI population in Asia-Pacific, especially in some of
the fast-emerging markets, are creating a growing need for succession-planning services, but Firms will
need to cater to the significant differences between markets in the region.
Succession planning is getting
increased attention in Asia
Pacific, with a large number of
HNW clients now acknowledging
the need for such services. In fact,
research shows succession
planning services are now
deemed to be “important” by
more HNWIs in Asia-Pacific
than in most other regions.
Number of HNWIs by region
8

9. The emerging markets once again grew at a faster clip than markets in the developed countries. In
2012, AuM grew 16% overall in emerging markets, rising by a compound annual growth rate (CAGR) of 9% above its
2007 precrisis level. Emerging markets overall now represent roughly 8% of global AuM, compared with 6% in 2007.
China and Brazil in particular enjoyed robust growth in 2012, with
increases of 23% and 15%, respectively. The market recovery and the
appreciation of bonds were strong drivers. Net flows also contributed to
growth on average 5% in Asia (excluding Japan and Australia) and 2% in
Latin America. From 2009 through 2012, they provided 11% and 6% of
global growth, respectively.
Asia, excluding Japan and Australia, represented $3.8 trillion of
AuM an increase of 17% in 2012. Both the retail and Institutional segments
contributed solid growth: 22% and 15%, respectively.
In the developed markets, which represent roughly 90% of global
AuM, managed assets grew 9% in 2012. On average, developed markets have
grown at a CAGR of 1% since 2007.
Top ten strategies by
2012 Net sales (Billions)
9

10. Opportunities for asset managers are increasing, but their strategic challenges and
operational complexities are keeping pace.
•Under pressure from regulators and investors, the boards of asset management (AM) companies
and funds have greater oversight responsibilities than ever.
Governance
•The financial crisis and its aftermath revealed the true extent of asset managers’ risks. High
correlations between credit, market, liquidity and valuation risks underscored the need for more
adaptive approaches to investment risk management.
Risk
•New regulations are creating a complex web of regulations around the globe, just as national
regulators step up their scrutiny and enforcement procedures.
Regulatory Complexity
•Evolving regulatory regimes, combined with greater and more complex transaction volumes, are
stretching front-, middle- and back-office systems.
Operations & Technology
•Asset managers are finding that greater transparency enhances trust – building confidence in
reporting accuracy, governance and accountability.
Trust & Transparency
•While M&A volumes have failed to meet expectations in the past year, asset managers have
good strategic reasons for making acquisitions.
Strategic M&A
•Growth is struggling against the headwinds of economic uncertainty and market volatility. Asset
managers are scrutinizing their businesses to find ways of strengthening their market positions
and exploiting the few growth opportunities that exist.
Organic growth
•As signs of tentative market recovery continue, asset managers are investing in recruiting and
retaining talent. Competition for the best people is as great as ever.
Human capital
10

11. In the latest Global Financial Centres Index survey, Hong Kong and Singapore were ranked third and fourth
respectively for its asset management industry for three consecutive years, while the top two places were
occupied by London and New York. China is also a huge market for the asset management industry. However,
due to the restrictions on foreign exchange and financial markets, foreign-funded asset management
companies face difficulties in entering the Chinese market, while Chinese companies need approvals when
investing overseas. Thus, The analysis on the development of China’s asset management industry focuses on
domestic markets, while assessments of the Hong Kong and Singapore markets, which are completely open,
are based on their potential in becoming regional hubs for asset management.
Singapore intends to strengthen regulatory oversight over the fund management industry in the year
2012. Fund management companies with more than S$250 million in assets will be required to obtain a license
from the Monetary Authority of Singapore, while smaller funds will have to register with the regulator.
11

12. The rising importance of South America, Asia, Africa, Middle East (SAAAME)
Assets under management in the SAAAME economies are set to grow faster than in the developed world in
the years leading up to 2020, creating new pools of assets that can potentially be tapped by the AM industry.
However, the majority of assets will still be concentrated in the US and Europe.
In 2010, Asia ex-Japan’s weightage in the MSCI World Index was only 9%, while its total contribution to GDP
approximated 18%. By 2020, Asia ex-Japan’s contribution to GDP could be well above 25%. As this becomes
reflected in the MSCI World Index, it will result in new and substantial money flows into the capital markets of the
East. These flows will be considerably enhanced by the likely internationalisation of the Chinese renminbi by 2020,
which will open up what will eventually become one of the world’s significant AM markets.
In 2012, the AM industry managed 36.5% of assets
held by pension funds, sovereign wealth funds (SWF),
Insurance Companies, mass affluent and high-net-worth
individuals (HNWI). Model predicts that, by 2020 the AM
industry will Manage $101.7 trillion of clients’ assets,
implicitly assuming the penetration rate to remain constant.
However, given the AM industry is successful in penetrating
these clients assets further, we believe that the AM industry
would be able to increase their share of managed assets by
10% to a level of 46.5%, which would in turn represent a
$130 trillion in Global AuM. Global AuM projection by region for 2020
12

13. At the client level, the global growth in assets will be driven by three key trends:
• The increase of mass affluent and high-net-worth-individuals (HNWIs)3 from SAAAME.
• The expansion and emergence of new SWFs with diverse Agendas and investment goals.
• The increasing defined contribution (DC) schemes partly, Driven by government-incentivised or government
mandated shift to individual retirement plans. Foundations and endowments Will also continue to gather AuM
as the generations born after World War II continue to bequeath part of their wealth. These foundations and
endowments will rely predominantly on asset managers to earn returns on their capital.
The rise of SAAAME as an opportunity for asset managers
In a recent PwC survey, more than 40% of asset
Managers in developed countries looking to other
countries for their long term future believe the most
important geographical area of focus will be the
SAAAME region. SAAAME markets will provide
opportunities for existing global asset managers to tap
new pools of wealth and significantly expand their
franchises (as we explore in the second section of this
report). But it will equally provide the backdrop for a
number of fast-growing SAAAME-based Competitors to
emerge and not only take on the global
managers in SAAAME regions, but in developed markets as well.
Global HNWI asset projection by region for 2020
13

14. Mass affluent clients and HNWIs in SAAAME regions are key drivers of growth
From more than $59 trillion and $52 trillion, respectively in 2012, assets owned by mass affluent4 and
HNWI investors are expected to rise to more than $100 trillion and $76 trillion respectively by 2020. The
growth is expected to be higher for the mass affluent sector (with a CAGR of 6.8%) than for HNWIs (4.9%). The
single greatest contributor to this surge in mass affluent and HNWI assets is increasing SAAAME wealth. Mass
affluent clients in SAAAME regions will, for instance, more than double their wealth between 2012 and 2020.
The global middle class is projected to grow by 180% between 2010 and 2040, with Asia replacing Europe
as home to the highest proportion of middle classes, as early as 2015. Between 2010 and 2020, more than one
billion more middle class consumers will emerge
globally, representing the largest single-decade
increase in customers in history. This increasing
affluence will fuel the need for financial products for
a young and growing constituency. In addition to the
HNWI growth, there will be a massive increase in the
middle class in the developing regions. Although the
growing middle class represents low individual wealth,
there is significant opportunity to serve that
demographic if done thoughtfully and efficiently.
Global mass affluent wealth projection by region for 2020
14

15. Asia-Pacific has been a growing region in the hedge fund industry in recent years as both investors
and managers have realized the potential of this emerging region for alternative investments. This is a
significant period for the hedge fund industry in the Asia-Pacific region. New developments, in particular the
advent of the new Securities Investment Funds Law in China, could lead to significant changes in the region
and provide a boost to the hedge fund industry.
Breakdown of Asia-Pacific investors by type
Over recent years, the Asia-Pacific region had been
growing in prominence in the investment community at large.
Driven by the rapid economic growth of countries like China,
one of the key developments has been the rapid expansion of
the financial markets in the region. This development offered
hedge fund managers in the region a multitude of investment
opportunities, and also indirectly led to a gradual maturing of
institutional investors in the region, with increasing numbers of investors
based in Asia-Pacific looking to invest in hedge funds in search of higher yield
and diversification.
15

16. Despite the advent of Abenomics in Japan and robust numbers from Southeast Asia, the overall financial
outlook of the Asia-Pacific region is looking stormy. Afflicted with concerns like a slowing China and crippling levels
of inflation being battled in India, overall growth rates in the region are slowing.
Breakdown of Hedge Fund mandates Issued
by Asia-Pacific Based Investors by Type
However, a deteriorating macro-economic environment may be
the catalyst for further increased interest in hedge funds, as asset
managers from the region continue to hunt for higher yields. 41%
of Asia-Pacific based institutional investors plan to increase their
allocations to hedge funds over the coming 12 months and 45%
plan to maintain their allocations. As a result, there should be plenty of
Opportunities for hedge fund managers to attract new investment, with
the majority of investors in the region looking to at least maintain their level of exposure
over the coming year.
Asia-Pacific based hedge fund managers currently represent less than 4% of total hedge fund industry
capital despite the region being home to a substantial number of managers. This is well below
the share of assets Asia-Pacific contributes to the overall global financial economy, suggesting there is
opportunity for the hedge fund industry in the region to grow significantly in the future.
16

17. Asia-Pacific-focused hedge funds have outperformed the overall hedge fund benchmarks in both 2013 (as
of July 31) and 2012, as well as on an annualised basis over the past two, three and five years. A comparison of rolling
12-month returns by regional focus is presented in below chart. A comparison of rolling 12 months by regional focus
shows that Asia-Pacific hedge funds have had lower returns when compared to their North American counterparts
over most of the last three years. However Asia-Pacific was the best performing region over the 12-month period
ending July 2013, posting a return of 18.61% compared to returns of 15.38% and 11.97% achieved by North America
and Europe- focused funds respectively.
Performance of Asia-Pacific-focused Hedge Funds
Equity-based funds dominate the hedge vs. All Hedge Funds
fund market in Asia-Pacific and long/short funds in the
Asia-Pacific-focused benchmark posted impressing
12-month net returns of +22.06% for the period ending
July 2013. The top ten performing funds managed by
Asia-Pacific firms for the 12-month period ending July
2013 were funds using a long/short approach. Asia-
Pacific long/short funds have outperformed the overall
long/short benchmark over the past 12 months and
also on an annulised basis over the last three and five
Years. These funds have also significantly outperformed
European long/short funds over these periods, although
they have fallen slightly short of North America-focused
long/short funds on an annualised basis over the last
three and five years.
17

18. Asia-Pacific-based hedge funds focused on the region and Asia-Pacific-focused hedge funds
that are managed by firms headquartered outside of the region. The chart shows that in each of the last
six years, hedge funds based in the Asia-Pacific region have achieved higher returns in times of positive
performance and harsher losses in times of negative performance. Despite the increased volatility, it
seems that Asia-Pacific-based funds have produced stronger risk-adjusted returns in recent years, with
the three-year Sharpe ratio (measured with a risk free rate of 2% as of 31 July 2013) for these funds
measured at 0.77 compared to 0.46 for Asia-Pacific-focused hedge funds headquartered outside of the
region. Over the course of the year so far, Asia-Pacific based funds have produced returns which are
nearly three times higher than funds which are based elsewhere focusing on the region. This suggests
that Asia-Pacific-based managers may have been been best placed to generate strong returns off of the
burgeoning markets caused by developments such as Abenomics.
In the past Asia-Pacific hedge funds have been
perceived to be risky investments, with higher risk than
their counterparts based in Europe and North America.
However, over the past 12 months these funds have been
successful in achieving positive performance and providing
attractive risk-adjusted returns. The impressive performance
of Asia-Pacific funds in the last 12 months has attracted the
notice of investors both at home and further abroad; this
could enable the Asia-Pacific hedge fund industry to grow to
record levels in the coming years. Despite these positives,
Asia-Pacific hedge funds continue to have higher volatility
than the global hedge fund average, and this is something
which may continue to deter more risk-averse investors from
allocating to the region.
Performance of Asia-Pacific-Based vs. Asia-Pacific-Focused
Hedge Funds, 2007 - July 2013
18

19. Global pension fund assets projection by region for 2020
Pension fund assets will reach close to $57 trillion by 2020
Retirement assets have risen from $21.3 trillion in 2004 to $33.9 trillion in 2012 and we
predict they will grow by 6.6% a year to reach $56.5 trillion by 2020.
Defined Benefit (DB) schemes will persist for the balance of this half-century and even though
the majority of them will be frozen and/or defeased, they will continue to represent a critical mass of AuM.
However, the increase in investable assets mainly stems from DC schemes created in countries of fast-growing
GDP and prosperity. By 2020 DB schemes will represent a far smaller, though not insignificant,
pool of assets; however, DC will be dominant model for retirement savings. The growth in pension assets
and the regional breakdown are shown below.
Pension funds will swell the total assets
managed as both developed and developing countries
attempt to bring more savers under the retirement
umbrella. Growth in new pension assets will be
strongest in Latin America and Asia Pacific with growth
rates above 9% each. But the US and Europe will still
have the largest pools of assets in 2020 – above $30
trillion in North America and close to $14 trillion in
Europe.
19

20. An important real estate theme that has developed since the aftermath of the recent financial
turmoil is the rapid growth of APAC’s invested stock, which by definition and according to DTZ refers to the
value of commercial real estate held by investors. These stocks are typically of good quality and are
attractive as an income generating asset. Given Asia remains in a better shape economically and with the
relative stability of its financial markets, invested stock grew by 13% in US dollar terms as compared to 8%
in Europe and 0% in North America.
Within Asia, China unsurprisingly leads this expansion as its invested stock reached USD 1.3 trillion
in 2011, not far behind Japan’s USD 1.4 trillion which remains APAC largest market, home to circa 36% of
the region’s total invested stock Based on current pace of growth, China should by 2013, become Asia’s
largest invested market despite a vast majority of existing investment capital still domestically sourced.
The potential for further stock growth is clear as China has yet to truly access the queue of capital for its
domestic market. On the other hand, this
easing of capital flow restriction may potentially
redirect some of the domestic capital across
the, region with the gateway cities; e.g.
Singapore, Hong Kong and Sydney likely to be
the immediate beneficiaries .
20

21. Mutual funds and mandates to grow in tandem
Mutual funds are expected to grow at
an annual rate of 5.4% and mandates at an annual
rate of 5.7%. Mutual fund growth will be fuelled by
the growing middle-class client base that is saving for
retirement and wealth accumulation. Mandates, on
the other hand, will see growth through institutional
investors such as pension funds, with the ongoing
shift from pay-as-you-go pension systems to DCs.
Mandates will also swell as a result of the rise of
SWFs and HNWI clients, who are accumulating
wealth at a fast pace.
21

22. Asia is one of the fastest growing and most exciting mutual fund markets. As the region’s economies have remained resilient
following the financial crisis, the rising middle class in countries like China, Indonesia and India is getting wealthier and is
beginning to dip its toes into the new world of investment funds. Assets under management (AuM) are rising quickly, just as sales
slow in Europe.
Asia’s fund industry represents a significant growth opportunity for international asset managers, yet distribution in the region
is not straightforward. The regional market is geographically fragmented and large consumer banks dominate distribution in some
countries. Fund investors’ preferences vary from one country to another and the local regulatory approach is still evolving. As a result, asset
managers distributing in the region need to tailor their approaches to specific markets and remain sensitive to regulatory changes.
Even so, the long-term prospects for Asia’s mutual
fund growth look promising. While Asia is home to
approximately 60% of the world’s population, Asian
investors’ investments only account for 13% of the
mutual fund industry’s global AuM, compared to 52% in
the Americas and 35% in Europe, according to PwC
research. Comparisons of fund AuM to local gross
domestic product (GDP) (see table) tell a similar story
of low investment. This low penetration means that there
is ample opportunity for growth as Asia’s middle classes
become wealthier.
AuM as a proportion of GDP
22

23. UCITS account for most sales
Although asset managers can only sell funds directly to retail investors in established markets such as
Singapore, Hong Kong and Taiwan, Europe’s Units in Collective Investments in Transferable Securities (UCITS)
funds account for most of the fund sales in these markets. In emerging markets such as Malaysia, Korea and
Thailand, offshore funds can only be sold through feeder fund structures or wrapped products. In other markets
such as China, India and Indonesia, full distribution of offshore funds is currently not permissible.
The number of UCITS funds registered for sale in Asia is increasing quickly. As at December 2011, 5,614
UCITS’ funds were registered for sale, up from 5,434 in December 2010. Singapore accounted for approximately
2,125 of these funds, and Hong Kong for a further 1,240.
The success of UCITS funds in Asia is a phenomenon of the past ten years. Both the tireless efforts of
the European fund industry in promoting the UCITS brand and the signing of memorandums of understanding
with the key Asian regulators have opened the doors to cross border distribution outside of the EU.
But Asia’s fragmented geography means that distribution practices vary from one country to another,
making distribution across the region expensive. What’s more, large consumer banking platforms dominate
distribution in some countries. Sales charges and trailer fees paid to the distributor banks take a hefty chunk
out of the fees generated by asset managers, making the cost of distribution higher than that in Europe or the
US. This cost is ultimately passed on to the end-investor either as a sales commission, or through higher
expense ratios.
23

24. Regional UCITS Fund Registrations
Region of
Distribution
Total Registrations
Dec 2009
Total Registrations
Dec 2010
Total Registrations
Dec 2011
# new registrations
over the period
Europe 49956 54441 57650 3209
Asia Pacific 5307 5434 5614 180
Americas 2154 1922 1775 -147
Middle East 894 797 640 -157
Africa 233 218 252 34
Total 58544 62812 65931 3119
Domestic Vs Cross-Border Fund Registrations
Country N Of domestic funds q4 2011 N of foreign x-border funds notified
for sale q4 2011
% foreign funds
China 913 n/a Not Permitted
Hong Kong 233 1240 84%
Japan 4176 89 2%
Macau n/a 955 n/a
Singapore 558 2125 79%
South Korea 9485 280 3%
Taiwan 613 855 58%
24

25. There are significant
opportunities for asset
managers ahead. However,
there are also clouds
looming in the future.
Alongside rising assets,
there will be rising costs.
The costs of asset
management will continue
to soar as they have in
recent years and margins in
2020 may be no higher– and
may well be lower – than in
the current Post-financial
crisis era. Profits today are
still 15% 20% below their
pre-crisis highs – according
to industry analysis – and it
is debateable whether they
will have reattained these
levels by 2020.
•The costs of responding, and complying with, regulation may plateau, but will
likely remain high by historical measures.
•Commercial cost pressures will also rise as firms grow their distribution
networks and product manufacturing capabilities to take advantage of
increased opportunity, particularly in SAAAME regions.
•Fees earned by asset managers will be under continued pressure amid the
ongoing push for greater transparency and comparability from investors as well
as scrutiny from policymakers and regulators.
•Investment in technology and data management will also need to be
maintained or increased to maximize distribution opportunities, or to benefit
from new opportunities offered by new technologies and social networks, and
to cope with the rigours of regulation and reporting.
•New entrants to the AM industry from other sectors could disrupt a structure
that has existed largely, unchanged, for several decades.
25

26. •Asset management has long been in the shadows of its cousins in the banking and insurance industries. By 2020, it will have
emerged definitively from their shadows.
•The asset management industry needs to further develop trust within the broader community and this starts with ensuring
this community understands what asset management stands for and how it works, as well as the duty of care it practices on
behalf of investors.
•By 2020, four distinct regional fund distribution blocks will have formed which will allow products to be sold pan-regionally.
These are: North Asia, South Asia, Latin America and Europe. As these blocks form and strengthen, they will develop
regulatory and trade linkages with each other, which will transform the way that asset managers view distribution channels.
There will be far greater regulatory integration within the Greater China bloc including China, Hong Kong and
Taiwan. The Hong Kong–China mutual recognition will be fully established and the framework will have been
adjusted to enable flexible product with retail distribution from Hong Kong into China. Taiwan will also have
joined the link-up. In South-East Asia, the ASEAN countries’ efforts to create a structure that allows
recognition of mutual funds in all countries of the region will be well-established by 2020. The original ASEAN
platform of Singapore, Thailand and Malaysia will now include Indonesia, the Philippines and Vietnam, all
emerging countries with large numbers of wealthy middle-class investors.
Both the North Asia and South Asia regions will, by 2020, have created initiatives that facilitate cross-selling of
investment funds. The APEC Asia Funds Passport initiative will be in existence, with the first fund launched in
2016 by the founding members – Australia, New Zealand, Singapore and Korea. By 2020, other countries such
as Japan will have come into the fold. As a result, the regional cross-border fund passporting regimes will by
2020 have started to enter interregional bilateral agreements, paving the way for an integrated passport at a
quasi-global level and allowing asset managers to distribute products across Asia.
26

27. Global AuM to exceed $100 trillion by 2020
The Global Financial Crisis (GFC) of 2008–2009 was a major economic event affecting millions
of people, but only led to a temporary detour in the long-term growth path for assets managed by the
industry. They have continued to rise and today, worldwide assets under management (AuM) total $63.9
trillion. Predictions are that this will rise to around $101.7 trillion by 2020, a compound growth rate of
nearly 6%.
As global economies become increasingly integrated and interdependent, regional AuM is
influenced by GDP growth in other regions. For example, changes in AuM in China can be caused by
changes in US GDP. Therefore looking at the impact of GDP growth in strong economies such as the US
when forecasting regional AuM.
There has been a rapid accumulation of foreign assets by many of these SWFs, particularly
by oil-exporting and some Asian nations, thanks to high oil prices, financial globalisation and sustained
large global imbalances. This trend is set to continue over the next decade. As a result, the size of SWFs is
rising fast and their presence in international capital
markets is becoming more prominent. SWFs’ AuM are currently above $5 trillion and are set to surge to
nearly $9 trillion by 2020.
SWFs based in the Middle East and Africa will grow the fastest, with Asia Pacific also seeing a
rapid rise in SWF assets.
27

28. While traditional actively managed core assets grew in 2012, general believe is that this asset class will
remain vulnerable to the market’s evolution. Managers need a long time strategy that anticipates those
changes.
• The continuing fast growth of solutions & specialties confirms a structural shift in the market. The advance of
these asset classes will continue to outpace the growth and squeeze the market share of traditional actively
managed core assets. Traditional managers hoping to surf these new flows successfully should be ready to
face fundamental decisions about how to participate and what capabilities to develop.
• The most successful managers in every region are either specialists or traditional providers who have
become ambidextrous that is they have maintained their active core asset business while also developing
capabilities to capture new faster growth assets. For traditional players, investment in specialties, multi asset
skills, or specific services will be a key to participating in the new faster-growth flows.
• Cost discipline has become an increasingly important focus since the crisis. Although efficiency gains in basis
points from 2007 through 2012 were largely driven by the growth of asset values, managers are now more
actively managing their cost structure.
• The operating model is a growing source of strategic advantage. For many managers an aggressive operating-model
review will be required to realize their growth ambitions. Operations and IT have been largely
bypassed in asset managers’ efficiency campaigns, which usually focus on other corporate and front-office
functions. That is a costly lapse, strategically as well as financially. Reviewing their operating model – beyond
boosting efficiency – is the key to flexibility, scalability and future growth.
28

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29
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