A new report on Asia’s financial markets by Cerulli Associates, the research firm, finds that private banks encourage product innovation and attract larger volumes, while insurers often provide stickier flows through investment-linked products.
Raising mutual fund assets in Asia ex-Japan seldom equates to retaining assets, Cerulli Associates says.
“Large funds do not necessarily get the strongest inflows and even when they do, asset retention is often a problem,” it says.
The reasons for this situation include high “churn”, investors' persisting penchant for short holding periods, and potential erosion of first mover advantage due to a bad investor experience, Cerulli's Asian Distribution Dynamics 2013 report says.
This conclusion applies across several Asian markets, including China, Korea, and Taiwan (onshore funds). In Korea, for example, some 87 onshore equity funds were launched in 2010, raising an average of $14.4 million each. A year later, four of the funds were shut, and the remaining 83 saw an increase in their average assets under management to $21.2 million. By the end of 2012, there were only 77 funds left.
Cerulli argues that such results explain why “distribution dynamics” come into play. Getting a fund on board the right channels is important not only to gather, but also retain, assets. Private banks, for example, can be a test-bed for innovative products, especially exotic, higher-risk products, while insurers can provide stickier flows through investment-linked products.