Asia’s dynamism is shining through in asset management too as China transforms and opens up, investors become more sophisticated and awareness of the need for sustainable long-term returns grows steadily.
As the asset management industry undergoes major changes, it is essential that asset managers have a forward-looking strategy to grow their business, especially in Asia, and have answers to vital questions such as how the AM landscape is changing and what the game changers defining the industry in coming decade will be.
China evolution, regulation driven
Over the past decade, the Chinese government’s deregulation has gradually opened up investment opportunities for foreign asset managers. Overall, financial liberalisation is inevitable, driven by the government as well as gradual market development such as China’s weight in global benchmarks. This looks set to continue to rise in coming years.
Total Chinese assets managed by financial institutions are expected to reach an estimated 50 trillion yuan (USD 7.5 trillion) by 2022, based on a report by global consulting firm Oliver Wyman. This highlights the vast opportunities in this growth market.
We have been operating in this market for more than a decade now. Today, we have a wholly foreign-owned enterprise – a 100% WFOE – looking to bring our global asset management capabilities to the Chinese market through our qualified domestic limited partnership (QDLP) license. In fact, we are the first foreign asset manager to launch an environmental, social and governance product under the QDLP quota, making us one of the ESG market leaders in China.
Ultimately, China does allow things to happen in a controlled and methodical way. In addition, it takes patience, temperament and agility to grow in this market.
Holistic bespoke solutions, shaping the future in Asia
The Asian market as a whole is becoming much more sophisticated. With technology coming into play, it is no longer just about offering traditional plain vanilla asset allocation or investment solutions.
Discussions with investors around solutions are outcome-based. We are seeing more asset managers leveraging on progress in digitisation to gain a competitive edge. The market is evolving, client expectations are higher, and asset managers are finding it more compelling to assess where their business stands so that they can deliver a truly client-centric experience.
We believe it is important to continue to innovate our investment capabilities, and optimise operation efficiency and distribution platforms. Ultimately, we believe in becoming a solutions provider rather than a product pusher, offering bespoke solutions to better meet a client’s mid-to-long term investment needs.
Sustainable investing in Asia
Our commitment to sustainability is not new. As a responsible investor, we have been practicing ESG globally for over 20 years. We are a founding signatory of the United Nations Principles for Responsible Investment (PRI) and have since seen other market players following suit in the last two years.
This is definitely vindication that asset managers face the pressing need to adopt a more holistic approach and strategy to achieve the long-term sustainable investment returns for investors.
However, we have taken our commitment to sustainable investment further, launching a firm-wide sustainability strategy to set the standard and define clear objectives and KPIs against which we can measure success and our impact for clients and the economy.
These objectives focus on three key themes: energy transition, the environment and equality (the ‘3Es’). Our approach includes investment, divestment, stewardship and integration. In our 2019-2022 sustainability investment roadmap, we have developed key targets and performance indicators for each ‘E’.
BNPP AM has recently become a member of the Asia Investor Group on Climate Change, where we will continue to play an active role in advocating ESG and engaging with investors in Asia, companies, and policymakers in the transition to a low-carbon global economy.
We strongly believe this is in the interest of our clients. Sustainability is at the heart of what we do. We look forward to working with investors and peers in the industry to promote sustainable investing and drive greater adoption.
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The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay.
Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher than average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity, or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.