IMAS: SG Fund Managers See 3 Key Growth Drivers
Amidst fee compression and disruption to normal distribution channels, fund managers in Singapore cited three future drivers of investment growth.
More than half (58 percent) of the fund managers ranked increasing client demands for innovative products as the top future driver of investment growth in the next three years, according to the 2019 fund manager outlook survey conducted by the Investment Management Association of Singapore (IMAS).
The adoption of ESG investments (47 percent) and use of FinTech in fund distribution channels (45 percent) ranked next on the list.
«Even though the market is increasingly competitive, new technologies will continue to be a key driver of growth, and as an industry, we are working to identify problems that could be fixed by FinTech solutions,» said Nicholas Hadow at the IMAS media luncheon on Wednesday.
Biggest threats to growth
When asked what could set back growth, the IMAS pointed out commoditisation of public markets and rising costs of governance. For example, some fund managers are merging to gain trillion-dollar assets - partly to mitigate rising costs and fee compression, and partly adopting the view that big is sexy.
«For firms with extra-territorial reach, the issuance of General Data Protection Regulation (GDPR) and MFID II have impacted some firms in Asia,» said Rodney Lim, head of compliance at Nikko Asset Management, who was speaking at the luncheon.
According to its survey, 68 percent of the respondents chose margin compression due to competition as one of three biggest threats to growth. The other two threats that were most picked by fund managers were: lower returns due to rising compliance costs, and lack of investment product innovations to support changing market trends.
Rising Regulatory Costs
«The regulators are not satisfied by the fact that you have a centralised legal compliance team in your HQ. They want a dedicated compliance officer in one jurisdiction and one complaints officer. This is a real squeeze on costs,» explains Lim.
Training, compliance and legal costs have gone up sixfold to sevenfold in the last decade, noted the IMAS panel. The annual IMAS Investment Managers’ Outlook Survey identifies key themes affecting the industry each year. Now in its fourth year, this year’s survey gathered responses from 42 different fund management and related businesses in Singapore.
