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Cerulli Report On Asia Examines Private Banks, Insurers In How They Retain Assets

Tom Burroughes Group Editor 17 September 2013


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.

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