Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a...
Transcript of Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a...
![Page 1: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/1.jpg)
Singapore’s fund management industry
10th Asia Oceania Regional Meeting11 March 2005
![Page 2: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/2.jpg)
2
Agenda
• Historical summary of the growth of the investment funds industry
• Factors contributing to the growth • Challenges ahead
![Page 3: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/3.jpg)
3
Key themes
Growth
ProcessImprovement
ControlledEnvironment
Cost reduction and outsourcingClient service reinventionTransparency and disclosures
Mutual fund oversightInternal controls and regulatory complianceRisk management
Search for margin growthInnovate product offeringFocus on hedge funds and alternativesConsolidation – small is beautiful
![Page 4: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/4.jpg)
4
Fund managers have had to deal with a number of issues globally as well as locally
CorporateGovernance
Outsourcing
Market consolidation
Marketing timing & late
trading
Fight for talent
Reputation & investor
trust
Brand protection
Source: PwC Global Investment Management Survey 2003, PwC research
Distribution channels
Anti Money laundering
![Page 5: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/5.jpg)
5
Asian fund markets - the case for growth?
0 .0
1.0
2 .0
3 .0
4 .0
5.0
6 .0
7.0
8 .0
9 .0
10 .0
Singapore Thailand Indonesia HongKong
China Malaysia Korea Taiw an Philippines
%
2003 * 2004 * 2005 *
Estimated 2004/2005 Gross Domestic Product Growth Rate (in %)
Source:Asian Development Bank
Robust growth expected, fuelled by China’s economic locomotion, regional trade and expanding consumer demand
Mutual fund assets in Asia ex-Japan are expected to grow 12% annually over the next five years to US$560 billion by 2007 (2002: US$314 billion)
![Page 6: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/6.jpg)
6
High domestic savings rates provide significant opportunities for investment penetration
0 .0
5.0
10 .0
15.0
2 0 .0
2 5.0
3 0 .0
3 5.0
4 0 .0
4 5.0
50 .0
Singapore Thailand Indonesia Hong Kong China Malaysia Korea Philippines
%
2003 * 2004 *
Estimated 2003/2004 Gross Domestic Savings Rates (in %)
Source:Asian Development Bank
But uncertainty remains – eg. the continued unrest in Iraq, is the Chinese economy heading for a soft landing, where are US interest rates heading etc?
![Page 7: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/7.jpg)
7
The most significant growth in HNW financial wealth will be in Asia
Wealth Forecast - HNWI Financial Wealth by Region(US$ trillions)
8.2 8.4 8.711.0
7.6 7.4 8.5
14.05.3 5.96.5
9.3
3.5 3.63.7
4.7
0.80.8
0.8
0.9
0.60.6
0.6
0.8
2001 2002 2003 2008E
At 7%Growth
Source : Cap Gemini Lorenz curve analysis May 2004, World Wealth Report 2004
Europe 4.1%
North America 10.7%
Asia-Pacific 7.4%
Latin America 5.2%
Middle East 2.8%
Africa 4.6%
Annual Growth Rate2003 – 2008E
Worldwide 7.0%
Developments in the Fund Management Industry
![Page 8: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/8.jpg)
8
The growth in discretionary assets under management in Singapore is particularly encouraging
Growth in AUM
$ 180.7 $ 183.4
$ 254.6
$ 65.9$ 86.5
$ 125.0 $ 124.1 $ 111.9
$ 183.0$ 166.4
$ 210.6
$ 160.4
$ 126.3
$ 90.7$ 109.8
$ 38.7
0
50
100
150
200
250
300
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
S$
billi
on
Total Discretionary AUM Total Non-Discretionary AUM
Source:MAS Asset Management Survey 2003
![Page 9: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/9.jpg)
9
The number of collective investment schemes in Singapore is also growing
![Page 10: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/10.jpg)
10
And the number of Asset Management Companies…
![Page 11: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/11.jpg)
11
Singapore has also done well in attracting hedge fund talent, and is positioning itself to be a hub for alternative investments
Source: EurekaHedge
Hedge Funds and Managers : Location and Number
0
5
10
15
20
25
30
35
40
45
1997 1998 1999 2000 2001 2002 2003
No.
of m
anag
ers
Source: EurekaHedge (number of hedge fund managersbased in Singapore)
17%
17%7%
22%
20%
7%10%
Singapore USA Australia JapanHong Kong UK Others
![Page 12: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/12.jpg)
Growth of the industry
![Page 13: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/13.jpg)
13
Regulatory changes
• The CPF system introduced in 1986−Limited investment options – Singapore stocks,
unit trusts invested in Singapore, gold only• Liberalisation of the CPF system in 1990s −Addition of bonds, deposits, endowment plans,
fund management accounts and unit trusts investing in foreign markets
• No limit for CPF investments in unit trusts, whilst there are limits for stocks
![Page 14: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/14.jpg)
14
Regulatory and tax changes
• Feeder fund structures • Fund managers were able to set up structures that
feed into offshore funds • Offshore fund structures recognised for sale
• Fund managers are now able to sell offshore fund structures directly
• No tax on all revenues sourced out of Singapore
![Page 15: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/15.jpg)
15
Growth of Distribution channels
• Initially only foreign banks such as Standard Chartered Bank and Citibank sold foreign fund manager products whilst domestic banks sold funds managed by their bank’s asset management arms.
• Domestic banks started to sell foreign fund manager products.
• Distribution expanded to include Brokerages, Financial Advisors, Online.
• Growth of Independent Financial Advisors
![Page 16: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/16.jpg)
16
New products contributing to the growth of the industry
• Growth of sector funds such as technology, financials, healthcare
• Guaranteed/Structured products• Shift towards hedge funds and REITs
![Page 17: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/17.jpg)
Challenges for the future
![Page 18: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/18.jpg)
18
Challenges facing the fund management industry
Performance of global stock markets
Cost containment
Regulatory and compliance issues
Competitive pressure
Investor trust
Tax and regulatory barriers to cross-border distribution
Evolving client needs
Globalisation
63%73%
63
66
59
46
30
66
30
71
58
58
46
21
63
38
83%
72
67
61
50
39
61
22
67%
33
83
33
50
50
67
17
Total UK Europe Asia ex-Japan N. America
90%
60
70
70
40
20
50
40
???
Source: PwC Global Investment Management Survey 2003
![Page 19: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/19.jpg)
19
Top challenges to growth in Asia
0 10 20 30 40 50 60 70 8 0
Attracting new clients
Adapting to client needs/profiles
Brand image/reputation
Increased competition
Economic environment
Retaining existing clients
External regulation
Entering new markets
Major risk management failure/fraud
Developing local expertise
% of resp ondents
Institutional
Retail
Source: PwC Global Investment Management Survey 2003– Asia ex-Japan Response
![Page 20: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/20.jpg)
20
To increase profitability over the next 3 years, a number of strategic priorities are being taken
Improve existing product performance
Reduce costs
Develop new products
Refine existing products
Enhance skills of client managers
Better communication of investment performance (transparency, comparability)
Develop new / alternative distribution channels
Raise management fees
58%65%
35
51
17
20
14
54
13
50
39
21
17
8
42
8
72%
39
67
11
11
11
61
22
50%
17
50
17
17
17
50
17
Total UK Europe Asia ex-Japan N. America
100%
30
40
10
10
10
50
20
Source: PwC Global Investment Management Survey 2003
![Page 21: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/21.jpg)
21
Distribution of foreign funds in any particular country is not a piece of cake
Development of open architecture
0 10 20 30 40 50 60 70 80
Perceived demand
Regulatory environment
Cost of doing business
Tax and legal barriersto foreign funds
Significant wealthy population
Rates of investment return
Depth of local knowledge
Availability of service providers
Legal structure
Tax laws
% of respondents
89%
Source: PwC Global Investment Management Survey 2003– Asia (ex-Japan) Response
![Page 22: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/22.jpg)
22
Asia’s diversity in having multiple distribution channels poses many challenges
Mutual Funds - Distribution Channel Mix Across Asia
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Singapore HongKong
Malaysia Korea Taiw an Japan India Thailand Indonesia China
Banks Independent Brokers/IFAs Tied Agents Direct Sales Force
Source: PCA Analysis 2002, PwC Research
![Page 23: Singapore’s fund management industry · 2012-11-02 · Fund managers have had to deal with a number of issues globally as well as locally Corporate Governance Outsourcing Market](https://reader033.fdocuments.us/reader033/viewer/2022050409/5f86402aeb415e57b54cae2e/html5/thumbnails/23.jpg)
23
Contact detailsAndrew KwekExecutive DirectorInvestment Management Association of SingaporeTel: 65 6230 9717Fax: 65 6535 2349Email: [email protected]