Tuesday, October 25, 2016

Asian Investors Becoming More Conservative



The latest survey from global research and consulting firm Cerulli Associates (Cerulli) reveals that Asia ex-Japan retail investors of all age groups and wealth tiers have become more conservative in 2016 compared to 2015.  

The Cerulli Report – Asian Wealth Management 2016, which the survey was part of, notes that Asia ex-Japan retail investors have become less patient in their investment horizons. According to the survey, the proportion of respondents with an investment horizon of three years or less rose 48.4% in 2016, from the 39.1% seen in the 2015 survey, mainly as a result of unsettled market conditions.

Overall, Asia ex-Japan investors have higher cash holdings in 2016 compared to in 2015. Investors in Asian markets, with India being the exception, pared down their exposure to unit trusts, mutual funds, and exchange-traded funds.

Indian investors apparently switched to investing more in managed funds at the expense of investment properties. Also, Hong Kong investors reduced their exposure to investment properties due to prices falling steeply in recent years, and were seen to show increased interest in directly held bond investments.

In addition, the shift to alternatives from other asset classes has been muted for the past year. The survey reveals China is the only country that showed a more than one percentage-point uptick in holdings in the asset class between the 2015 and 2016 surveys.

This is attributed to the types of alternative products available in China, Cerulli notes – which are unlike those available in Singapore. Alternatives tend to be in the form of structured products in China, whereas in Singapore, they are often more conventional liquid alternative funds. Allocations to alternatives in Singapore remained steady over the period, according to the report, helped by their availability to lower-wealth-tier investors.

The survey also discovered that funds-of-funds managed by foreign asset managers have become popular in Taiwan, as they oversee seven of the top ten funds-of-funds in terms of inflows year-to-date July 2016. Taiwanese investors are very keen for international exposure as this provides foreign asset managers with the opportunity to leverage their reputation and expertise to make greater inroads onshore, Cerulli believes.

The research and consulting firm also notes that it will be harder for smaller, boutique foreign asset managers with niche investment products to enter the Taiwanese market due to the island-state’s Financial Supervisory Commission continuing to tighten regulations on the offshore fund space. This might have an effect on the diversity of products available to Taiwanese investors, and Cerulli notes that it will be ideal for offshore and onshore fund management to co-exist in order to prevent a potential stifling of further product innovation. - asisasset

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